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Trump to U.S. Postal Service: Raise Amazon's shipping rates

By The Washington Post
Dec. 29, 2017 at 11:02 p.m.

Packages pass through a scanner Aug. 3 at an Amazon fulfillment center in Baltimore.

WASHINGTON — President Donald Trump on Friday called for the U.S. Postal Service to raise the shipping rates that it charges Amazon.com, the online retailer, in a deal that he said disadvantages the federal agency.

"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? Should be charging MUCH MORE!" Trump tweeted Friday morning.

Moments after the opening bell, shares of Amazon fell by roughly 0.4 percent. That slide continued throughout the day, with the stock price finishing down 1.4 percent.

Trump is probably referring to a partnership between the Postal Service and Amazon in which the Postal Service carries Amazon packages in the last leg of their journeys to customers' doorsteps. It's just the latest in a series of digs by the president at Amazon, whose chief executive, Jeff Bezos, owns The Washington Post.

In this case, Trump's tweet misses some nuances of the arrangement between Amazon and the Postal Service but underscores a real debate about whether the USPS is charging Amazon — and other retailers — enough to deliver packages. Parcel delivery has become an increasingly important part of the Postal Service's business as first-class mail has continued a long-running decline.

Spokesmen for the Postal Service and Amazon didn't immediately respond to requests for comment Friday. In July, Amazon told Fortune magazine that the Postal Regulatory Commission, which oversees the Postal Service, "has consistently found that Amazon's contracts with the USPS are profitable."

Amazon defended its program in July after Josh Sandbulte, a hedge fund manager with a stake in FedEx, wrote an articles for Wall Street Journal opinion page asserting that the Postal Service effectively subsidizes Amazon, losing an average of $1.46 for each shipment it delivers. The article cut against a view that rising volumes of e-commerce shipping might lift the Postal Service's long-struggling finances.

Sandbulte largely based his article on an April report from analysts at Citigroup arguing that the Postal Service's employee benefits were acting as a drag on the USPS's profitability.

"We contend that the USPS does not act as a rational price-setter in the parcel market," the report said. "Remedying this could be the key to the organization regaining operating solvency. . . . To this day, price still does not cover all-in costs."

The report said the average cost of parcel shipments might jump from $3.51 to $4.97 if the USPS appropriately priced the service. It also said that since the Postal Service pricing provides strong downward pressure on competitors UPS and FedEx, those companies also probably would increase prices.

The Postal Service recorded a net loss of $5.6 billion in 2016, which it blamed on employee health care costs.

Although Amazon is the biggest user of the parcel delivery service, the Citigroup analysts warned that Amazon would also be best positioned to absorb any increase in shipping costs because of its size and extensive leverage in the shipping market.

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