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Will Trump's False Attacks on Amazon Slow the Juggernaut?

By Motley Fool Staff – Apr 23, 2018 at 8:27PM

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The U.S. Postal Service actually loves the e-commerce titan, and it pays more taxes than it has to. But maybe that won’t matter.

In this segment from an episode of Motley Fool Answers, Robert Brokamp and Alison Southwick are joined by Matt Argersinger of Million Dollar Portfolio and Supernova to consider the odd aversion that pro-business President Trump seems to have for Amazon.com (AMZN -1.57%).

His attacks, while having no basis in fact, have cost the e-commerce leader a significant chunk of market cap in recent weeks. What's really going on? Is the real issue less about taxes or the postal service and more political? (Or dare we say it, ahem, journalistic?) And will it make a difference to the company in the long run?

A full transcript follows the video.

This video was recorded on April 17, 2018.

Alison Southwick: Let's move on but stick with the headlines. While everyone else is going after Facebook, Trump has his sights elsewhere. Rumour has it. Who's in the headlines? People close to him say that he is obsessed with Amazon and not in a good way. He tweeted that the company was ripping off the postal service and should pay millions more than they do, and Amazon stock fell 7% after that tweet. Were you surprised by that?

Matt Argersinger: I guess I was surprised.

Southwick: One tweet sends it down 7%.

Argersinger: It's amazing when you can have that kind of effect. He's the president of the United States, but it is still such a large company.

Southwick: And the tweet wasn't even accurate.

Argersinger: Well, right. And to use Trump's own words against him, I would say a lot of it is just fake news. The idea that Amazon doesn't pay sales tax, for example. They do pay sales tax on all the things they sell. They actually pay more sales tax than they're supposed to.

Until the Supreme Court decides later this year, the law currently says that unless you have a physical presence in a state, you don't have to pay sales tax. It goes back to catalogs and things like that. Amazon doesn't exactly have a physical presence in every state, yet they pay sales tax on all their inventory in every state that they sell goods. So, they're actually doing more than they should do by the letter of the law.

Where sales taxes are being paid for the most part are on Amazon's third-party sellers. If you're a third-party seller [which by and large are small businesses who go on Amazon], you might be buying shoes from a small retailer in Kentucky who isn't required, right now, to charge you sales tax. I don't even know if Kentucky has a sales tax. I should probably pick a different state. But that's how it's working.

If that's what Trump is going after, then he's making an argument against small-to-midsize businesses, in a way. He's not really making an argument against Amazon, which already is paying sales tax, so that argument falls by the wayside.

As to the whole postal service argument, the postal service has come out and said, "No, no. We have a great relationship with Amazon. In fact, we make a lot of money on Amazon. In fact, packages are the biggest growth engine of our business. Where the post office is losing money is on first class mail.

Southwick: E-mail! You should get that on email! And Slack!

Argersinger: Right. And not to harp on it too much, but then there's the bluster about Amazon's caused Main Street to suffer. All these small businesses are closing. Well, no. Amazon, as we just talked about, is an enabler of small business. But even beyond that, that's [what's been said about] Walmart, Target, and Costco for decades -- that they've taken away the mom and pop general store.

You can tell I'm a little more passionate about this one. I just think the attacks are unfair. I know politics isn't our bag at The Fool, but I've got a feeling that Jeff Bezos's ownership of The Washington Post might have a small role to play. A tiny role. We don't have to get into it.

Southwick: I think Bezos has remained silent on the issue. I have not seen that he has responded, so I imagine he just wants this to blow over. Bezos is too busy making money.

Argersinger: Or flying to Mars. You're right.

Southwick: He's got too much going on. But bottom line, you're not too concerned about Trump's war with Amazon.

Argersinger: No, no, because anything Trump does to limit Amazon's business or change its relationship with the post office, or even it's DoD contracts with Amazon Web Services, he's got to understand that he's going to be affecting a lot of other businesses including Walmart, who has a big online presence in how they do business. I feel like this is all personal against Amazon, Jeff Bezos and, yes, I expect it to blow over.

Southwick: What do you think the chances are that Amazon H2Q is coming to D.C.?

Argersinger: I think the D.C. area [so Maryland, D.C., Virginia] is at the top two or three. It just makes too much sense.

Southwick: I hope they don't come here.

Argersinger: You don't? I hope they do!

Southwick: No! Are you kidding? It's hard enough to buy a house.

Robert Brokamp: Exactly.

Southwick: Or drive down the highway.

Argersinger: All the traffic. I know.

Brokamp: You're going to be competing with those people to try to buy a house. Goodness! And child care? Goodness gracious!

Southwick: One of the spots that Alexandria pitched is Eisenhower.

Argersinger: All right.

Southwick: Which you can see from our office. I'm so upset about this.

Argersinger: They're going to have a softball team. It's on. Between them and The Motley Fool.

Southwick: Oh, there's so many more of them. But we are strong. We are a strong company.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Alison Southwick owns shares of Costco Wholesale. Matthew Argersinger owns shares of Amazon. Robert Brokamp, CFP owns shares of Facebook. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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