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Trump’s war with Amazon over US Postal Service threatens businesses

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Trump MAGA hat
President
Donald Trump.

Jae C. Hong/AP
Images


  • President
    Donald Trump
    has doubled down on his
    claims
    that Amazon is
    abusing its relationship with the US Postal Service, saying in
    a tweet Monday that
    the company was turning the USPS
    into a “delivery
    boy.”
  • The USPS’ low fixed costs and mandate to deliver mail
    to Americans make it an ideal option for “last mile” delivery,
    something that has served Amazon
    well.
  • Amazon, however, is far from the only American company
    that benefits from the USPS’ current pricing plan.

President Donald Trump is doubling down on his claims that Amazon
is abusing its relationship with the US Postal Service.

“The Amazon Washington Post has gone crazy against me ever since
they lost the Internet Tax Case in the U.S. Supreme Court two
months ago,” Trump tweeted
on Monday. “Next up is the U.S. Post Office which they use, at a
fraction of real cost, as their ‘delivery boy’ for a BIG
percentage of their packages.”

The tweet is part of a
months-long battle
that Trump has waged against Amazon,
focusing on the e-commerce giant’s use of the USPS for
deliveries.

In April, Trump
ordered the formation of a task force
to investigate the USPS
and what he called its “unsustainable financial path.” The order
said the USPS had lost $65 billion since the Great Recession and
needed to be “restructured to prevent a taxpayer-funded bailout.”

“Only fools, or worse, are saying that our money losing Post
Office makes money with Amazon,” Trump tweeted earlier in April.
“THEY LOSE A FORTUNE, and this will be changed. Also, our fully
tax paying retailers are closing stores all over the country …
not a level playing field!”

And when later asked about the issue by reporters, Trump said,
“Amazon has the money to pay the fair rate at the post office,
which would be much more than they’re paying right now.”

Trump, however, is ignoring some key points in his battle with
Amazon.

The post office’s problems


Amazon
Amazon
boxes.

Getty/Rick T.
Wilking


Trump’s argument isn’t constructed entirely out of thin air.

The USPS reported a net loss of $2.7 billion on $69.6 billion in
revenue in 2017. Raising prices on shipping packages is seen as
one way to address this problem. Since Amazon is one of the USPS’
biggest customers in the package-shipping business, Citi
estimates that raising prices could cost the e-commerce giant

billions of dollars
.

Trump has so far failed to acknowledge, however, that Amazon
isn’t the only company that is getting a great deal from the
USPS.

“They get a little bit of special treatment, just because they
pump in so much of the volume … It’s really no different than
anyone else pumping that much volume into the network,” Logan
Purk, an analyst at Edward Jones, told Business Insider earlier
this year. “But I don’t think it’s this fleecing that the
president thinks it is.”

The USPS’ low fixed costs and mandate to deliver mail to
Americans make it an ideal option for “last mile” delivery, or a
package’s journey from a fulfillment depot to its final
destination.

Amazon and other companies, like FedEx and UPS, drop off sorted
packages, and postal workers deliver them on their usual route.
It’s a unique setup that allows the USPS to charge lower rates
than competitors.

Additionally, the USPS offers lower prices because its primary
function isn’t to generate profit.

“Similar to public plazas and mass transit, the USPS’ first
priority is to serve civilians,”
Business Insider’s Leanna Garfield reported
. “It’s also
notoriously hard for cities and states to not lose money from
maintaining subways and publicly owned parks, which is why those
services are heavily subsidized by tax dollars and user fares.
The USPS does not receive federal money, but Congress still
controls the service’s budget and operations.”

Raising prices could hurt American businesses across the board


usps postal service vans snow
US Postal Service
vans.

Jeff Zelevansky / Getty
Images


Any person or business using the USPS to ship packages is getting
a better deal than they would get at competitors, thanks to the
USPS’ unique model.

If Trump’s
task force makes the USPS raise prices
, these costs will
affect not just Amazon but any business that ships packages. And
as USPS prices increase, FedEx and UPS will be able to charge
customers more and still remain competitive.

“A free hand on package pricing at the post office has been good
for consumers, good for the post office, and good for online
sellers like Amazon,” Business Insider’s Josh Barro wrote in an
op-ed article
that identified issues with Trump’s argument
.

Amazon did not immediately return Business Insider’s request for
comment on Trump’s latest tweets.

Amazon is a one-of-a-kind company in many ways, but when it comes
to saving money under the USPS’ price structure, it’s far from
unique.

As the company that ships the most goods, Amazon is saving the
largest amount of money — but the e-commerce giant also
has the funds to deal with an increase
. Other companies may
not be as fortunate.

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