Trump accuses Amazon of taking massive subsidies from the ‘Post Office’ — and it sets an ominous precedent for HQ2

  • President Donald Trump tweeted on Friday that the US Postal Service was undercharging Amazon and that it was making the “Post Office dumber and poorer.”
  • Analyses have found that Amazon’s deal with USPS allows the e-commerce company to pay less to deliver packages than it would pay other delivery services.
  • The backlash against Amazon could signal problems for cities offering it financial incentives to host its second headquarters, called HQ2.

President Donald Trump has declared war on Amazon.

“Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer?” Trump tweeted on Friday morning.

He continued: “Should be charging MUCH MORE!”

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Trump appears to be referring to a deal that USPS has struck with Amazon, along with some other e-commerce retailers.

Bloomberg cited the Bernstein Research analyst David Vernon as estimating that the agency delivered 40% of Amazon’s packages in 2014.

Amazon pays roughly half as much to have packages delivered the “last mile,” or the final leg of their journey from shipping hubs to their destinations, by USPS than it would have to pay FedEx or UPS, Bloomberg reported, citing 2015 estimates from Vernon.

A Citigroup analysis earlier this year found that it would cost Amazon $US1.46 more to ship an average package through USPS if costs were “fairly allocated.” As Amazon ships millions of packages a year, these subsidies add up quickly.

“It is as if every Amazon box comes with a dollar or two stapled to the packing slip – a gift card from Uncle Sam,” Josh Sandbulte wrote in The Wall Street Journal in July. “Amazon is big enough to take full advantage of ‘postal injection,’ and that has tipped the scales in the internet giant’s favour.”

The deal also benefits USPS in many ways. While the agency posted a net loss of $US2.1 billion in the most recent quarter, its package delivery is a profitable service, unlike its letter delivery. With this in mind, it makes sense that USPS would want to strike a deal with one of the biggest players in e-commerce, even if that would mean giving the company a better deal.

Distrust of Amazon is growing

While USPS may see this as a win-win situation, however, Trump’s tweet serves as a reminder that many Americans are souring on Amazon as the e-commerce giant grows ever larger.

USPS subsidies are far from the only deal Amazon is brokering.

Cities across North America are pledging millions of dollars toward things like bullet trains and tax breaks if Amazon picks it as the site for its second headquarters, called HQ2. Philadelphia, for example, has spent $US245,000 on its HQ2 campaign, Philadelphia Weekly reported last month.

Amazon says that HQ2 will bring 50,000 new jobs and that the company will invest $US5 billion in the construction of its new headquarters, so city and state governments are likely to see spending hundreds of thousands of dollars to attract the company as justifiable.

But it still adds up to spending taxpayers’ money on trying to win over Amazon.

Amazon is no longer a brand beloved by all, as the president’s tweet shows. And as those city and state governments vie for HQ2, they’d be wise to remember that not everyone wants their tax dollars spent on buttering up Amazon.