Trump’s Holiday Gift for E-Commerce
Loyola University Chicago School of Law, JD 2019
Just in time for holiday shopping, and at the beginning of Q4, President Trump delivered some news for holiday shoppers. In what shocked some, but others found as expected and inevitable, President Trump continued his message to the world that the US will not be “handing out donations” much longer. His latest re-negotiation to bring dollars back to the US has left overseas ecommerce providers wondering what the latest move in this Administration’s financial overturn is going to do for their business. It’s not the big players like Amazon that’ll feel the brunt of this, but the smaller players in the eCommerce space that outsource their products overseas may feel a hit in their margins as this move by Trump takes its toll.
What is ePacket?
The Universal Postal Union (UPU), an agency within the United Nations that aids in coordinating postage policy between the nations, helped to negotiate postal rates that allowed ease of foreign commerce to enter the US, among other agreements with other nations. ePacket is the terminal dues regulations that allowed suppliers to use services like eBay, Alibaba, AliExpress, and even Amazon, to bring cheap products into the US which ultimately lowered the cost to the consumer.
This didn’t go without penalty though, someone had to cover the bill. That’s just what happened, and probably illustrates why President Trump wants to level the playing field. The USPS covers a majority of the shipping costs, allowing companies in the US who import their products from China to take advantage of these cheap deals and compete heavily with US-based suppliers.
When news hit of the President’s decision to re-negotiate, or withdraw from this agreement, US suppliers were excited. This would allow US suppliers to be able to compete with the prices from those Chinese-based suppliers, even those companies within the US that outsource most of their inventory.
This should not come to a surprise to any of those following the strategies, motivations, and tactics of this Administration. The goal to supply and restore businesses within the US should not come as any surprise as the White House has been touting these goals since Trump became President.
The net effects of this change are not quite yet known, of course. The negotiations are occurring over the coming months as the UPU will meet with US representatives to see if such a drastic change is necessary, or whether the impact could be lessened.
But one thing is for sure, those companies that take advantage of the extremely cheap shipping costs, and use that as an advantage over the big players to deliver goods to customers almost at cost are going to have to find a new strategy. Without the advantage of ePacket and the next-to-nothing cost of shipping, it could mean the end for a lot of the smaller players in eCommerce that outsource their supplies. It is unlikely, though, that eCommerce Giants like Amazon and eBay will notice any change. Their fulfillment models allow for a mixture of US and Overseas-based products such that it’s unlikely the big players will even notice this change.
It’s the little businesses that stand to suffer from the dramatic shift in how we regulate commerce from foreign importers, and if there’s no course change in the path going forward, the negative effect on little businesses will soon be realized.