Trump criticizes USPS’s Amazon discounts, here will be the back story on its pricing

President Donald Trump took aim at the U.S. Postal Service on Friday for offering Amazon as well as different e-commerce companies low rates for package delivery.

The USPS, when reached by CNBC, said of which will be looking into the issue.

At the heart of the issue will be the Postal Service’s essentially monopolistic hold on the letter business as well as whether of which will be using of which clout to subsidize the cost of its package delivery.

To prevent an unfair advantage in letter mail, the government has tightly controlled how much USPS charges for its letters. of which also instituted reforms to ensure of which does not use its letter business to support its package delivery business. (In different words, use revenue by its high-margin mail business to lower the cost of its package delivery.) Doing so could give of which an unfair edge over commercial carriers such as FedEx as well as United Parcel Service.

Those reforms, some have argued, are out of date.

The government in 2006 passed the Postal Accountability as well as Enhancement Act, saying the Postal Service cannot cost its parcels below cost. A year later, the government clarified of which 5.5 percent of the USPS’ fixed costs must be allocated to packages as well as the like.

yet mailing patterns have changed drastically over the past decade, as well as of which 5.5 percent benchmark has become minuscule as the volume of packages of which USPS delivers skyrockets.

The USPS delivered 5.7 billion packages in 2017, a 27 percent jump by 2015. of which delivered 58.7 billion first class mailings, a decline of 6 percent by 2015.

“We contend of which This specific floor for competitive (parcel) products has been maintained at artificially low levels, creating large-scale systemic economic inefficiencies engendered by what will be effectively a government-enforced taxpayer subsidization of the USPS’ irrational pricing,” wrote analysts at Citi in April.

The package pricing, argued Citi, hurts USPS’ competitors, who have to match similar pricing. of which may also be hurting USPS itself.

USPS reported $69.6 billion in sales in fiscal 2017, a 2 percent drop by the year prior. of which reported a loss of $2.7 billion in 2015, down by a loss of $5.6 billion a year prior.

The question thus arises as to why the mailing service appears to be undercutting itself. As letter mailing increasingly becomes a smaller piece of the business inside future, the service may not want to mess with the growth of which sees in packages.

Meantime, while of which could right now be argued Amazon needs USPS more than the reverse, there always remains a threat Amazon could buy its own delivery service.

An earlier type of This specific story misstated the number of packages USPS delivered in fiscal 2017.

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