- President Donald Trump ordered the creation of a task force to study the US Postal Service and its financial difficulties on Thursday.
- Trump has criticised 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 $US65 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 $US2.7 billion on $US69.6 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 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
Any person or business using the USPS to ship packages is getting a better deal than they would get at competitors, thanks to the Postal Service’s unique model.
If Trump’s task force makes the Postal Service raise prices, these costs aren’t only going to impact Amazon – they’re going to impact any business that ships packages. Not only will USPS prices increase, but FedEx and UPS will be able to charge customers 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 for Amazon,” Business Insider’s Josh Barro wrote in an op-ed arguing why Trump’s argument is flawed.
Amazon is a one-of-a-kind company in many ways, but when it comes to saving money due to the USPS’ current 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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