In this video we’ll cover whether or not Amazon (AMZN) is actually abusing the Post Office and what’s going on with the US/China trade war.
This week Trump went on a tweet storm about how Amazon takes advantage of billions in subsidies from the United States Postal Service (USPS). He claimed Amazon was costing taxpayers a fortune and tanking the mail carrier’s business.
Trump vowed to change this and his tweets helped knock Amazon’s share price down a few pegs. But does Trump have a point here? Is Amazon really milking the post office and costing them huge losses?
As usual… no… Trump does not have a point.
The thing to remember here is that the post office is run by the government. And that’s why it’s unprofitable.
It can’t do things like charge profitable market rates for deliveries. USPS can only charge what Congress allows it to. And if it wants to increase prices, it needs approval. It also faces a lot of friction when trying to close down unprofitable branches. But the most crazy law USPS has to follow is fully prefunding the health care costs of its retirees’ 75 years in the future. That costs them $5 billion a year.
Trump doesn’t have a leg to stand on with his claims. His attack on Amazon is personal. Bezos owns the Washington Post, a newspaper that’s been critical of Trump in the past. These tweets and further action against Amazon is Trump’s attempt to get back at Bezos for the newspaper.
This week we also saw back and forth between China and the US. Each country promised more and more tariffs against the other. But it’s important to remember that this is just posturing. All these tariffs are just potential tariffs. Nothing has actually happened yet.
The most likely outcome is negotiations between the two where the US comes out with better trade terms with China. This is a benefit for the US, especially considering how China abuses its trading partners.
Recent market volatility hasn’t been due to these “trade wars” though. It’s because the market is repricing risk after an unusually calm 2017.
And remember, stay Fallible out there investors…