The potential effects of privatizing the U.S. Postal Service

E-commerce brands have traditionally relied on the United States Postal Service (USPS) as the most cost-effective option for delivering low-weight, low-value goods domestically. 

Thanks to its vast network supported by federal subsidies, USPS has been able to deliver packages to remote corners of the country quickly and affordably — a service model that wouldn’t be economically viable for its private-sector competitors like UPS and FedEx, which focus on larger packages and densely populated urban markets. State postal carriers like USPS play a crucial role in supporting small businesses worldwide.

USPS is not unique with similar subsidized postal systems existing globally, including Royal Mail in the United Kingdom and Deutsche Post in Germany which share similar obligations on country-wide delivery. With privatization looming, USPS will find itself competing on a level playing field for the first time while still maintaining its Universal Service Obligation (USO) — the requirement to deliver to every American household regardless of profitability.

The currently subsidized infrastructure that enables USPS to fulfill this obligation will become increasingly difficult to maintain under a private business model. The push for USPS privatization should be viewed in the context of broader policy shifts. During his previous term, President Trump took particular interest in the Universal Postal Union (UPU) and its terminal dues system. This system, originally designed for an era when low-weight postage meant paper letters rather than goods, allows Chinese businesses to ship small packages internationally to the U.S. at rates often lower than domestic shipping costs for U.S. businesses.

Trump’s 2018 administration announced plans to withdraw from the UPU. And now, in 2025, his focus has shifted to proposing tariffs on key e-commerce fulfillment countries, particularly Mexico and China.These policy changes come at a time when both Mexico and China are seeing significant growth in direct fulfillment operations. 

Goods increasingly flow from the Port of Los Angeles directly to Mexican warehouses, where
they’re stored and redistributed to U.S. customers at speeds comparable to shipments from Texas or California, but at substantially lower costs. Similarly, many brands now opt to ship directly from Chinese factories to Chinese warehouses before final delivery to U.S. customers. 

These arrangements capitalize not only on the UPU agreement but also on Section 321, a U.S. Customs and Border Protection provision that enables duty-free entry of shipments valued at $800 or less into the United States. USPS often serves as the final delivery partner for these shipments, handling the crucial last-mile delivery.

The impact of these policy shifts is already being felt. In response to Trump’s tariff threats, the Mexican government has imposed a 15% increase on tariffs for finished textile goods. This has led numerous third party logistics (3PL) warehouses operating under these systems to declare their business models unsustainable. 

Throughout this evolution of global e-commerce, USPS has shouldered the burden of an antiquated international postal system — one designed long before the advent of massive e-commerce operations sending millions of packages directly to U.S. customers at rates that prove increasingly unsustainable.

Regardless of one’s stance on these policy changes, the transformation of USPS and international shipping regulations will likely have adverse effects on e-commerce brands seeking affordable domestic shipping and last-mile delivery options. The shift away from federal support, combined with potential new tariffs, could significantly impact these businesses’ operating costs and competitive positioning in an increasingly complex global logistics landscape.