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Abu Dhabi, UAEFriday 22 June 2018

Amazon founder becomes Trump's new enemy

Vendetta is about The Washington Post investigation into Russia links, not Amazon, observers say

Jeff Bezos, the founder and CEO of Amazon.com, speaks in the State Dining Room of the White House in Washington in May 2016. President Donald Trump is criticising the US Postal Service, saying the agency is “losing many billions of dollars a year”. Susan Walsh / AP
Jeff Bezos, the founder and CEO of Amazon.com, speaks in the State Dining Room of the White House in Washington in May 2016. President Donald Trump is criticising the US Postal Service, saying the agency is “losing many billions of dollars a year”. Susan Walsh / AP

US President Donald Trump is only just getting started in his war with Amazon, according to White House insiders and observers.

Mr Trump has launched a number of attacks on Amazon, extending his barely-disguised proxy war with Jeff Bezos, the online retailer's founder and the owner of The Washington Post.

The president's aggressive style, fashioned in New York’s febrile business world, could spell more turmoil after a string of tweets that sent Wall Street into a spin.

Amazon has lost $60 billion (Dh220.3 billion) in value since last week, when reports first surfaced on the Axios website that Mr Trump was “obsessed” with the company.

He has railed repeatedly against what he sees as an unfair subsidy from the US Post Office, the company’s tax record and its impact on what are known as “mom and pop” high street stores forced out of business by the internet behemoth.

Some of his criticisms will chime with long-standing concerns about how Amazon built its low-cost model.

But long-time observers of Mr Trump see another motive: a vendetta against Mr Bezos and his Washington Post, which has led coverage of the investigation into the president’s links to Russia.

“This is not about Amazon, this is about The Washington Post, which the president views as a direct threat” said Hank Sheinkopf, who has watched Mr Trump’s rise from his vantage point as a veteran political consultant in New York.

“It is part of his obsession with fake news. He wants to punish Bezos and make The Washington Post back off.”

The tactic, he added, was straight from the Trump New York playbook, which he deployed in his battles with mayors and competitors. Threats of legal action and media grandstanding were designed to make opponents retreat in order to protect their pockets.

“In Trump’s style of operation the threat is supposed to signify the potential act,” he said. “It’s a very New York tough guy approach. It’s called ‘sending a message’.”

Those threats have come thick and fast in recent days as Mr Trump took to his Twitter bully pulpit.

“I am right about Amazon costing the United States Post Office massive amounts of money for being their Delivery Boy,” he wrote on Tuesday. “Amazon should pay these costs [plus] and not have them bourne [sic] by the American Taxpayer. Many billions of dollars. PO leaders don’t have a clue (or do they?)!”

A similar intervention a day earlier sent shares in Amazon falling by 6 per cent, dragging down other tech stocks and much of the rest of Wall Street.

The fall in Amazon cost Mr Bezos $6 billion, according to the Bloomberg Billionaires Index, although he remains comfortably the richest man in world history with a net worth estimated at $115bn.

Mr Trump’s comments were based on suspicions that Amazon is unfairly benefiting from favourable rates from the postal service.

Details of its payments are not publicly known. An analysis by Citibank last year suggested parcel payments had not kept pace with the growth in deliveries — and should cost an extra $1.46 per package on average. Some Wall Street analysts estimate Amazon pays the postal service about half of what it would to United Parcel Service or FedEx for the same service.

“President Trump's comments are consistent withsources we have spoken to in the shipping industry, who often label Amazon’s deal with the USPS as a sweetheart deal,” wrote Tom Forte, an analyst with DA Davidson, in a briefing note.

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When Mr Trump previously floated the idea inside the White House of increasing Amazon’s postal charges he was told by Gary Cohn, then his chief economic adviser, that the retailer provided vital revenue to the US Postal Service, according to Washington sources.

“This is something he has wanted to do for a while but there were more conventional voices telling him he couldn’t do it,” said a former adviser. “Those voices have gone.”

A recent whirlwind of dismissals and resignations has delivered a more unconventional team, more in line with Mr Trump’s own thinking.

Other sources told Vanity Fair that a wider discussion is now under way about how to damage Amazon.

One idea is to encourage attorneys general across Republican states to investigate the company’s business practices. The Pentagon recently agreed a multimillion dollar deal with an Amazon partner to provide cloud computing services — an agreement that some advisers are reportedly urging the president to cancel.

Such threats are typical of Mr Trump’s modus operandi learnt in the hurly burly of New York’s real estate market, according to Mr Sheinkopf.

Mr Trump’s feuds with city mayors remain the stuff of legend in the city. His rise coincided with the reign of Ed Koch in the 1980s, leading to a series of epic clashes. The business mogul dismissed the mayor as a “moron” as they battled repeatedly over a tax abatement for Trump Tower and the developer’s plans for a television centre on Manhattan’s West Side.

This time around, said Mr Sheinkopf, the president’s tactics may backfire. Attacking Amazon and The Washington Post may simply increase the newspaper’s scrutiny of his business dealings and ties to Russia.

“The problem here is that it is hard to see Bezos telling his Washington Post guys he has billions at risk and they need to tone down the coverage. Bezos doesn’t need the money.”