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Trump, the stealth tax-raiser

Rick Newman
Senior Columnist

Got a few bucks for the president? He needs it to settle a score.

President Trump has been pressuring the postmaster general to double the shipping rates the U.S. Postal Service charges e-commerce giant Amazon, according to a nearly unbelievable account in the Washington Post. Can Trump really do that? It’s a question we’ve asked many times during the last 16 months. The answer this time is — probably not.

Trump, of course, has been attacking Amazon for months, out of personal animosity toward its CEO, Jeff Bezos, who also owns the Washington Post, which routinely publishes unflattering Trump material (like the postal scoop it just got from, well, who knows). So in the august tradition of history’s best statesmen, Trump wants to use his power as president to punish a single company for petty personal reasons.

It must gall Trump that he can’t. Amazon’s rates with the USPS are set by contract, and even the president can’t abrogate a contract. That contract isn’t public, so we don’t know the rates Amazon gets or how long they’re locked in. Most analysts, however, think Amazon gets the same rates as other big shippers, with the USPS turning a tidy profit on its business with Amazon.

That contract will end, however, perhaps this year or next. That’s when Trump might have leverage. Let’s say he got his way and forced the U.S. Postal Service to double delivery fees for Amazon. The company would do what companies always do. First, it would look for other, cheaper delivery sources, such as UPS and FedEx. But if the Postal Service raised delivery rates, competitors would be able do to the same thing. Rates could even go up for non-Amazon shippers, such as Walmart.

One company and millions of households

Amazon would also try to pass on as much of the added cost to its customers as it could. And Amazon can get away with that—it just raised its annual fee for Prime members by 20 bucks, to $119 per year. More than 100 million consumers have an Amazon Prime account, most of them in the United States. Trump’s shipping surtax wouldn’t be huge — a dollar or two per package, say — but it would be spread across a ton of people.  All in all, it would be an extraordinary fee for a president to impose on one company and millions of households.

[Check this out: Amazon is way more popular than Trump.]

Trump has other plans that would raise costs for consumers. He has already imposed new tariffs on some steel and aluminum imports, driving up costs for businesses that purchase those commodities as components in other products. Some of those firms say the move will hurt business and jeopardize jobs. Trump has also threatened to impose a much larger set of tariffs on up to $150 billion worth of imports from China. That would undoubtedly push up the cost of some products, which is why economists consider tariffs a hidden tax.

Trump’s recent decision to withdraw from the Iran nuclear deal could push up gasoline prices. Trump plans to reimpose sanctions on Iran meant to cut off its ability to sell oil. If it works, there will be a bit less oil flowing into global markets, pushing prices up. Anticipation of this eventuality is one reason oil prices have risen by about $12 a barrel this year, to around $72. The average price of gas will probably crest $3 per gallon soon, and could drift toward $3.50 by mid-summer.

In negotiations over the North American Trade Agreement, Trump reportedly wants Mexico to raise its average wages for auto workers from around $2 per hour to $15. That’s obviously a giant, and implausible, increase. The idea is to make it more expensive to build cars in Mexico, creating an incentive for manufacturing more cars in the United States. But if it happened, it would push car prices up, as well.

Trump, of course, signed a big set of tax cuts in December, which he’s been bragging about ever since. That legislation slashed the tax rate most businesses pay, with modest tax savings for middle-class workers. But with the other hand, Trump is pushing polices that are lot less friendlier to businesses and consumers.

There are checks on what Trump can get away with. Amazon seems sure to sue over any government policy that seems anticompetitive or targeted at it alone. Trump faces political risks, as well. Few voters will be happy paying a Trump surcharge on package delivery or gasoline or Chinese-made products. Trump is already facing blowback for his trade policies that could cost Republicans votes in the November midterm elections. Imagine, on top of that, a line on your Amazon fee statement that says “Trump tax.” Even a dollar or two would be a dollar or two too much.

Confidential tip line: rickjnewman@yahoo.com.Click here to get Rick’s stories by email

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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman

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