U.S. President Donald Trump ordered a review of the United States Postal Service after his recent attacks on social media regarding Amazon.com Inc. (NASDAQ: AMZN). Although, Amazon is not mentioned in the presidential orders, it is evident that e-commerce giant is being targeted.
Trump wrote in the orders that USPS accounts for almost half of global mail volume, but recently, certain issues have come into light, which prompted him to launch a task force to review the postal service.
“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 where revenues are no longer sufficient to fund the pension liabilities and retiree health obligations owed to current employees,” wrote Trump in the White House statement.
“The USPS is on an unsustainable financial path and must be restructured to prevent a taxpayer-funded bailout.”
The task force will be led by Treasury Secretary Steven Mnuchin or his designee, according to the orders. In addition, the task force will almost comprise of the Director of the Office of Management and Budget and the Director of the Office of Personnel Management.
In late March, sources said that Trump was looking to attack Amazon by altering its tax treatment with antitrust or competition laws.
It seems likely that Trump’s justification to attack Amazon is rooting from his view that the online retailer is causing USPS to lose billions of dollars by underpaying it compared to other services, but the real motive is that Amazon is hurting his businesses as well as Amazon’s owned Washington Post’s aggressive position against the Trump’s administration.
“Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed.” tweeted Trump earlier in April.
The details of Amazon’s payments to USPS isn’t publicly known, but Wall Street analysts estimated that USPS receives approximately half the pay of what United Parcel Service Inc. (NYSE: UPS) and FedEx Corp. (NYSE: FDX) receive.
Although Trump argues that Amazon caused USPS to lose money, Wall Street analysts say otherwise about their partnership. Analysts have argued that Amazon is the reason USPS is still going and without it, the postal service could have been already bankrupt by now.
“An argument, however, could be made that the USPS was losing billions before it expanded its service offerings for Amazon and would, still, likely lose billions if Amazon discontinued its use of the USPS tomorrow,” DA Davidson analyst Tom Forte wrote in a note to clients.
Amazon uses USPS to delivery in what it calls the “last mile” of delivery, where carriers drop off packages at nearly 150 million locations daily, which is why USPS gets underpaid.
Instead of saying Amazon is the cause for losses, Trump says in the orders that USPS’ faltering financial stability is a result of it losing more than $65 billion in the past decade and a government mandate to pay $38 billion for required health benefits and retirement pension.
“Amazon has the money to pay the fair rate at the Post Office, which would be much more than they’re paying now,” Trump said to reporters at the White House earlier this month. “Amazon is going to have to pay much more money to the Post Office, there’s no doubt about that.”