Trump is threatening to force the US Postal Service to raise prices in his war on Amazon — and it could be a major blow to countless American businesses (AMZN)


Donald Trump

President Donald Trump ordered the creation of a task force to study the US Postal Service and its financial difficulties on Thursday.
Trump has criticized the Postal Service’s deal with Amazon, which he believes unfairly benefits the e-commerce giant.
However, if the Postal Service raises prices, it would likely impact all American businesses — not just Amazon.

Countless American businesses could get caught in the crossfire as President Donald Trump’s war on Amazon heats up.

On Thursday, Trump ordered the formation of a task force to investigate the US Postal Service and its “unsustainable financial path.”

Trump’s order stated that the USPS had lost $65 billion since the Great Recession and needed to be “restructured to prevent a taxpayer-funded bailout.”

The order follows weeks of Trump publicly slamming the USPS’ deal with Amazon.

“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 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.”

Amazon isn’t the only business getting a good deal

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.

However, Trump has so far failed to acknowledge 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. “But I don’t think it’s this fleecing that the president thinks it is.”

The Postal Service’s low fixed costs and mandate to deliver mail to Americans makes 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 a postal worker delivers them on their usual route. It’s a unique set-up 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 …read more

Source:: Business Insider


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