Published: Sat, April 14, 2018
Industry | By Johnnie Johnson

Trump orders Postal Service review after attacking Amazon

Trump orders Postal Service review after attacking Amazon

Thanks to President Donald Trump, the investment community is now taking a closer look at Amazon's (AMZN) relationship with the United States Postal Service.

The executive order is about Amazon.com: Though the executive order does not mention Amazon by name, it was widely interpreted as an escalation of Trump's long-running criticisms of the online retail giant, which the president has accused of bilking the postal service by not paying appropriate postage rates for package delivery.

That's why the new executive order could be more about Amazon CEO Jeff Bezos's other property, The Washington Post. An analysis by Citigroup found that the USPS does in fact charge less than it should to ship packages, which "could make Amazon susceptible to significant USPS price increases."But a change in prices could ultimately hurt the USPS, considering that Amazon could take its business elsewhere". Speaking on the condition of anonymity, one White House source confirmed to Bloomberg that any recommendations the task force puts forward could affect Amazon.

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Some financial analysts say the post office has actually benefited from Amazon, because it receives more revenue when they deliver more packages. "A number of factors, including the steep decline in first-class mail volume, coupled with legal mandates that compel the USPS to incur substantial and inflexible costs, have resulted in a structural deficit", the order states.

Amazon declined to comment on the executive order or Trump's Twitter tirades against the company. It also notes that USPS is on the hook for costly pension liabilities and retiree healthcare obligations that can't be funded by the service's current revenue. Revenue from packages grew by more than $2 billion from the prior year, by far the most of any service category.

The president has suggested that raising shipping costs could help alleviate the USPS' financial burden.

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A White House official said the presidential order was meant to come up with solutions to the problems at the Postal Service.

Treasury Secretary Steven Mnuchin will lead that task force. Amazon and the Postal Service signed a five-year deal in 2013 to deliver packages on Sundays, and both entities have declared the arrangement a success.

It said losses by the Postal Service since the 2008 recession had amounted to $65 billion. That appears to be working out for USPS, which said the growth in its package business was "a result of our successful efforts to compete in the ground shipping services and "last mile" e-commerce fulfillment markets, including Sunday delivery", in another financial report past year.

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