US Tariffs Result In UPS Reducing 20,000 Jobs On Amazon Deliveries
US Tariffs Result In UPS Reducing 20,000 Jobs On Amazon Deliveries
The high taxes could usher in the biggest trade disruption in over a century
United Parcel Service (UPS) has declared slashing 20,000 jobs and shutting 73 facilities as part of a planned reduction in deliveries for Amazon.com, and amid US President Donald Trump's tariffs that are roiling global trade.
A spokesperson for UPS claimed that the layoffs were due to shedding 50 percent of shipping volume from Amazon.com, its largest customer, and ongoing cost-cutting and efficiency projects under a major operational restructuring.
The move comes as Trump's aggressive trade policies have begun slowing economic growth and increasing expectations for a possible recession.
Contractually, UPS is obligated to create 30,000 jobs under its current national master agreement with Teamsters.
However, Sean O'Brien, the union's general president, said, "But if the company intends to violate our contract or makes any attempt to go after hard-fought, good-paying Teamsters jobs, UPS will be in for a hell of a fight."
Meanwhile, UPS plans to adhere to its contract. The company has a U.S. workforce of 406,000 workers, with over 75 percent represented by unions.
Commenting on the company’s earnings, Carol Tome, the CEO of UPS, remarked, "The world hasn't been faced with such enormous potential impacts to trade in more than 100 years.”
As the world's largest parcel delivery firm, UPS serves numerous industries and is seen as a measure of the global economy. Its top rival, FedEx, had faced a slowdown of late.
UPS intends to secure its profits by cutting $3.5 billion this year with its latest overhead reductions. A big percentage of the volume reduction from Amazon was money-losing because of moving goods from fulfillment centers.
Recently, President Trump slapped new 145 percent tariffs on many Chinese goods, escalating the standoff between the world's two largest economies. The import volume of the US is about 400,000 pieces per day at UPS, which is less than 2 percent of the global average daily volume.
The China-to-US trade lanes is the most profitable for UPS, accounting for about 11 percent of international revenue last year.
The company is rising in terms of volume from Europe and other Asian countries, including Vietnam and Thailand. However, China is a big market, and if Trump's hefty tariffs stick, replacing trade with China would take years.
The current China tariffs by the US could further slow the already sluggish shipments between businesses. The small and medium-sized businesses that UPS targeted to offset that weakness could get hit, as some of them source 100 percent of the goods they need from China. UPS is also reliant on deliveries for retailers, many of whom depend on China.
Meanwhile, Amazon also sources from China, and over 40 percent of the online retailer's marketplace sellers are based in that country. It would affect UPS if US consumers bought fewer goods from Amazon because of high tariffs.
The company also faces a sharp downturn from China-linked bargain e-commerce sellers Temu and Shein because the US plans to end duty-free status for most of their packages to the country.
Temu is already tacking an import charge at checkout, while Shein added the tariffs to the price of products.
Meanwhile, UPS and its retail customers are planning for the peak winter holiday season, when daily deliveries more than double.
It is hoped that the US and China will soon come to an agreement that normalizes trade. However, Brian Dykes, the Chief Financial Officer of UPS said that if the tariff war continued, it would result in a supply shock.
