Trump reignites feud with Amazon over USPS financial woes – but the relationship between the ecommerce giant and government agency is far more complicated

A USPS worker delivers packages in NYC during the pandemic. Alexi Rosenfeld/Getty Images
  • In an interview with “Fox & Friends” on Monday, President Donald Trump once again blamed Amazon for the United States Postal Service’s ongoing financial crisis.
  • Though the USPS does subsidise Amazon deliveries by charging the ecommerce giant lower rates and handling costly last-mile rural deliveries, it can’t afford to lose their business.
  • The agency reported a record net loss of $US2.2 billion between April and June.
  • Democratic policymakers said in March that the USPS was slated to run out of funds by the end of the summer.
  • Visit Business Insider’s homepage for more stories.

President Donald Trump is once again blaming Amazon for the demise of the United States Postal Service.

In an interview with “Fox & Friends” on Monday, Trump reignited his attack against the ecommerce juggernaut, stating that Amazon is killing the USPS.

The remark is one of a series of recent snipes the president has made at Amazon, including back in April when he placed fault on “internet companies that give their stuff to the Postal Service” in response to claims he tried to cut USPS funding from the $US2 trillion coronavirus stimulus bill.

“Amazon and other companies like it, they come and they drop all of their mail into a post office,” Trump said on “Fox & Friends. “They drop packages into the post office by the thousands and then they say, ‘Here, you deliver them.’ We lose $US3 and $US4 a package on average. We lose massive amounts of money.”

The president began firing shots at Amazon back in 2018, when he said the company had cost the USPS “billions,” and has since doubled down on the argument in recent months.

While the USPS does, in fact, subsidise Amazon deliveries by charging below market rates, the relationship between the agency and the ecommerce company is very complex, as previously reported by Business Insider’s Rachel Premack in May.

Though Amazon is its own largest delivery service, the USPS has been integral to completing last-mile deliveries in low populated rural areas. Morningstar analysts previously told Business Insider that delivering a package to a rural community is “exponentially” more expensive and costs Amazon an estimated 1.5-to-4 times more than in urban areas.

USPS coronavirus
Mail carrier during the coronavirus outbreak. AP Photo/Nati Harnik

As such, Amazon has constructed delivery centres primarily in urban areas or highly populated communities, and enlisted the help of the USPS to deliver items to more remote regions.

Ultimately, the USPS has no choice but to accept Amazon’s business – not only because of its Universal Service Obligation under the government requires it to serve all parts of the country, but also because turning away from the company would mean losing a significant chunk of its already dwindling revenue.

“It’s extremely common for largely fixed cost businesses to appear to ‘make a loss’ on their largest customer, because the alternative, of losing that customer, would have a worse profit outcome than serving them at a lower price,” Nicholas Farhi, a partner at OC&C Strategy Consultants, told Business Insider’s Premack in May.

Farhi added: “This is especially true at roughly the scale of the relationship Amazon has with USPS. Amazon is a big enough chunk of USPS revenues that, if USPS lost it, it would materially reduce their revenues without materially reducing their fixed costs.”

In March, Democratic policymakers said the agency was slated to run out of funds by the end of the summer, a timeline that puts universal mail-in voting in the November presidential election in peril.

The USPS reported a record net loss of $US2.2 billion between April and June as a result of the coronavirus and its impact on the national economy. While newly appointed Postmaster General Louis DeJoy – a top donor to Trump who took the helm of the USPS in May – has implemented a series of cost-cutting measures and leadership changes, USPS workers are bearing the brunt in lost overtime pay and slashed salaries, and Democrats are investigating mail delays.