Trump says a new report backs up his beef with Amazon's Post Office deal - here's why he's wrong
Win McNamee / Getty Images
- President Donald Trump claimed a "report just came out" that found the Post Office loses roughly $1.47 on every package it delivers for Amazon.
- However, the author of the report that Trump seems to be citing told Business Insider that this is the wrong interpretation.
- The report did find that the USPS' current pricing model is "unsustainable," and that adjusting it could cost Amazon $2.6 billion.
"The Post Office is losing billions of dollars and the taxpayers are paying for that money because it delivers packages for Amazon at a very below cost," Trump said on Tuesday. "That's not fair to the United States, and it's not fair to out taxpayers, and Amazon has the money to pay the fair rate at the Post Office."
Trump then claimed that a "report just came out" that found the USPS loses roughly $1.47 on every package it delivers for Amazon. He seems to be referring to a 2017 Citi Research report that has frequently been cited by people criticizing Amazon's use of the USPS.
However, according to the author of the report, Trump has the wrong interpretation.
"We never said Amazon is getting a $1.50 subsidy," Citi analyst Christian Wetherbee told Business Insider on Monday in a discussion of misinterpretations of the report, which actually says the loss per package is roughly $1.46 for the USPS.
Wetherbee continued: "If you read what that number is, it's the total package business is priced below cost. It has nothing to do with Amazon specifically."
The Citi report did find that the USPS' current pricing model is "unsustainable," as the USPS continues to bleed money that it needs to invest in benefits and other things such as new delivery vehicles. The Citi report estimated that a USPS price hike that would put the USPS on more even playing ground with competitors such as FedEx and UPS would cost Amazon $2.6 billion annually.
"Their business has been built, almost, on the back of this pricing model," Wetherbee said.
"Whether they're taking advantage of it or not," Wetherbee continued, "or just being astute players in the market and taking advantage of the cost arbitration, they are the ones who have probably leveraged it the most."
In other words, despite Trump's argument, Amazon is far from the only company that's getting an especially good deal from the USPS as the postal service bleeds cash. However, Amazon is shipping far more packages than other companies - meaning it is also saving much more money.
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