Trump steps up his attacks on Amazon

An Amazon warehouse in Florence, New Jersey. US President Donald Trump tweeted that the online retailer "must pay real costs (and taxes) now!" Mr Trump has been unhappy with Amazon over its use of the United States Postal Service.
An Amazon warehouse in Florence, New Jersey. US President Donald Trump tweeted that the online retailer "must pay real costs (and taxes) now!" Mr Trump has been unhappy with Amazon over its use of the United States Postal Service. PHOTO: NYTNS

WASHINGTON • US President Donald Trump lit into Amazon.com for the second time in three days with a pair of Twitter messages that said the online retailer "must pay real costs (and taxes) now!"

Mr Trump on Saturday claimed, citing reports he did not specify, that the United States Postal Service (USPS) "will lose US$1.50 (S$1.97) on average for each package it delivers for Amazon".

Amazon has said the postal service, which has financial problems stretching back for years, makes money on its deliveries.

White House spokesman Lindsay Walters said last Thursday that while the President was displeased with the e-commerce giant, and particularly instances where third-party sellers on the site did not collect sales tax, there were no administrative actions planned against Amazon "at this time".

Still, Mr Brad Parscale, who is managing Mr Trump's 2020 presidential campaign, hinted in a tweet late last Thursday that the administration may act to raise Amazon's postal costs. "Once the market figures out that a single @usps rule change will crush @amazon's bottom line we will see," Mr Parscale wrote.

Amazon.com, whose founder and chief executive officer Jeff Bezos also owns the Washington Post newspaper, has been a regular punching bag for Mr Trump.

Last July, the President mused about whether the newspaper was "being used as a lobbyist weapon" to keep Congress from looking into Amazon's business practices. He echoed that comment last Saturday, tweeting that the Post "is used as a 'lobbyist' and should so REGISTER".

Mr Trump spent Easter weekend at his resort in Palm Beach, Florida, and arrived at the nearby Trump International Golf Club early last Saturday, just after the tweets were published. He also criticised Amazon over Twitter during his winter vacation at Mar-a-Lago, saying in December that the postal service "should be charging MUCH MORE for package delivery".

Amazon regularly uses the USPS to complete what is called the "last mile" of delivery, with letter carriers dropping off packages at some 150 million residences and businesses daily. It has a network of over 20 sort centres where packages are sorted by zip code, stacked on pallets and delivered to post offices for the final leg of delivery.

While full details of the agreement between Amazon and the USPS are unknown - the mail carrier is independently operated and strikes confidential deals with retailers - Mr David Vernon, an analyst at Bernstein Research who tracks the shipping industry, estimated in 2015 that the USPS handled 40 per cent of Amazon's volume the previous year. He estimated at the time that Amazon pays the postal service US$2 per package, which is about half what it would pay UPS or FedEx.

A sudden increase in postal rates would cost Amazon about US$2.6 billion a year, according to a report by Citigroup in April last year. That report predicted that UPS and FedEx would also raise rates in response to a postal service hike.

Citigroup also said that the true cost of shipping packages for the USPS is about 50 per cent higher than its current rates, leading some editorial writers to conclude that Amazon was receiving the type of subsidy cited in Mr Trump's tweet last Thursday.

But the postal service's losses have little to do with Amazon and more to do with its large health-care obligations and the dwindling use of first-class mail.

"The Postal Regulatory Commission has consistently found that Amazon's contracts with the USPS are profitable," the company said.

"Amazon has invested hundreds of millions of dollars in a network of more than 20 package sortation facilities that inject directly into the USPS last mile network bypassing most of USPS network. This investment resulted in more efficient processes as well as thousands of jobs and related economic benefits in local communities."

The President's tweet also assumes Amazon would be forced to pay if the USPS increased its rates for packages. But Amazon has been setting up its own shipping operations in the US and elsewhere in the world to minimise costs. Under a new service being rolled out this year, Amazon would oversee the pickup of packages from warehouses of third-party merchants and delivery to home addresses.

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A version of this article appeared in the print edition of The Straits Times on April 02, 2018, with the headline 'Trump steps up his attacks on Amazon'. Print Edition | Subscribe