Amazon stock tumbles after Donald Trump attacks on Twitter

President Donald Trump on Monday doubled down on his criticism of the U.S. Postal Service’s (USPS) arrangement with Amazon, saying he would change how much the country’s largest online retailer pays in shipping fees.

“Only fools, or worse, are saying that our money losing Post Office makes money with Amazon,” he tweeted Monday morning. “THEY LOSE A FORTUNE, and this will be changed.”

The tweet marked the third time since Thursday that Trump has lashed out against Amazon. And the retailer’s stock was down 4.9 per cent in morning trading.

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Last week, he attacked the retailer for paying “little or no taxes to state & local governments” and said the company uses “our Postal System as their Delivery Boy (causing tremendous loss to the U.S.)”

Two days later, he asserted that USPS loses an average of $ 1.50 on each Amazon delivery. “This Post Office *scam* must stop. Amazon must pay real costs (and taxes) now!” he tweeted.

Amazon collects local taxes in the 45 states that require it, although third-party sellers may have other arrangements.

Trump also incorrectly said the Washington Post is a lobbyist for the retailer. (The Post is personally owned by Jeff Bezos, the founder and chief executive of Amazon. It operates independently of Amazon.)

Amazon and USPS declined to comment on Trump’s tweet Monday morning.

The Postal Regulatory Commission, an independent federal agency, oversees the postal service’s pricing structure and reviews its contract with Amazon annually.

Amazon does receive a discount from the Postal Service, though the details of that arrangement have not been disclosed. An independent regulator reviews the contract every year to make sure that it continues to be profitable for USPS.

Although Monday’s tweet was the first time the president implied that he would try to change how much USPS charges Amazon, he has railed against its pricing structure in the past. In December, Trump attacked the company’s arrangement with the U.S. Postal Service and said the agency should raise the shipping rates it charges 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?” he tweeted. “Should be charging MUCH MORE!”

A fast rise in parcel deliveries — many of them from Amazon — has helped offset some of the postal service’s losses in recent years. In 2017, USPS delivered 589 million more packages than it did a year earlier, amounting to an 11.4 per cent growth in volume and $ 2.1-billion increase in revenue. (Mail volume, meanwhile, decreased by about five billion pieces, or 3.6 per cent.) Overall, the postal service reported a $ 2.7-billion loss last year on revenue of $ 69.6 billion.

Amazon shed $ 53 billion in market value on Wednesday after Axios reported that the president is “obsessed” with regulating the e-commerce giant.

White House spokeswoman Lindsay Walters said on Thursday that while the president was displeased with the e-commerce giant, and particularly instances where third-party sellers on the site didn’t collect sales tax, there were no administrative actions planned against Amazon “at this time.”

Still, Brad Parscale, who’s managing Trump’s 2020 presidential campaign, hinted in a tweet late Thursday that the administration may act to raise Amazon’s postal costs, which are negotiated with the Postal Service. “Once the market figures out that a single @usps rule change will crush @amazon’s bottom line we will see,” Parscale wrote. “Doubt if the @washingtonpost will ever report the truth about @Amazon’s government subsidy.”

Amazon regularly uses the USPS to complete what’s 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 more than 20 “sort centers” where customer 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 U.S. Postal Service are unknown — the mail carrier is independently operated, and strikes confidential deals with retailers — 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 $ 2 per package, which is about half what it would pay United Parcel Service Inc. and FedEx Corp.

A sudden increase in postal rates would cost Amazon about $ 2.6 billion a year, according to a report by Citigroup from April 2017. That report predicted 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 Trump’s Thursday tweet.

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 post office charges some of the world’s lowest stamp prices.

“The Postal Regulatory Commission has consistently found that Amazon’s contracts with the USPS are profitable,” the company said in a statement. “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 that Amazon would be forced to pay if the Postal Service increased its rates for packages. But Amazon has been setting up its own shipping operations in the U.S. and elsewhere in the world to minimize 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.

With files from Bloomberg


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