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Trump is hitting Amazon where it hurts

President Trump is using the bully pulpit to break investors' faith in Jeff Bezos and Amazon.With a series of ...

Posted: Apr 4, 2018 12:35 PM
Updated: Apr 4, 2018 12:35 PM

President Trump is using the bully pulpit to break investors' faith in Jeff Bezos and Amazon.

With a series of broadsides against Amazon on Twitter and reports that he is raising the threat of antitrust lawsuits and tighter regulation, Trump has accomplished what Walmart, Target and rivals have failed to do: slow down one of the most successful companies in American history.

Jeff Bezos has built Amazon into a 21st-century General Electric: A massive conglomerate with business units in multiple growing sectors of the economy. Amazon's founder and CEO has extended the company's reach from an online bookseller in the 1990s to a retailer, grocery store, cloud leader, movie studio, and voice assistant today. Bezos has become the world's richest person in the process.

Yet Amazon has fallen 7% and has lost close to $60 billion in market value since Axios reported last week that Trump wants to "go after" the company. Trump has taken shots at Amazon five times on Twitter since then. Amazon did not respond to request for comment.

Related: Trump's latest tweet takes down Amazon stock and the Nasdaq

Investors don't believe competitors can beat Amazon's model. But regulation or the courts could. That's where Trump is aiming his attacks.

"They pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.)," Trump said on Friday. "This Post Office scam must stop. Amazon must pay real costs (and taxes) now!" he tweeted Saturday.

His Amazon tweets make several misleading statements: Amazon collects sales tax in every state that charges one and remits it to the states. It also pays the post office to deliver packages to customers' doors.

Related: Trump vs. Amazon: Let's set the record straight

But Trump is marshaling the same protectionist tactics to derail Amazon and boost its competitors that he used by slapping tariffs on imported steel and aluminum to prop up US manufacturers, said John Coffee, a professor of corporate governance at Columbia Law School. Both come at the expense of consumers, Coffee argued.

Increasing the rates Amazon pays to the Postal Service wouldn't cripple the company, said RJ Hottovy, an analyst at Morningstar. Amazon could be forced to raise fees for Prime memberships or to third parties that sell products on the website.

Raising postal fees could actually be counterproductive, he said. Amazon might choose to rely less on the Postal Service and small businesses could lose a crucial revenue channel.

Related: Amazon does big business with Trump's government

An antitrust case against Amazon would also be hard to prove.

The government must show that Amazon hurt consumers or limited competition through predatory practices.

Consumers aren't directly harmed from low prices and Amazon's "war of cost cutting," said Christopher Sagers, a law professor at Cleveland State University. But one antitrust theory against Amazon could focus on suppliers.

"Amazon has made itself so desirable that suppliers have to sell to them at lower prices," Sagers said. If Amazon is using its powers to squeeze suppliers, that could harm consumers by reducing the quality of products, discouraging innovation and leading to suppliers selling fewer products.

Even if Amazon does face stricter regulation or an antitrust case, it could continue to succeed.

Shareholders, convinced of Bezos' vision and Amazon's ability to keep growing, have gobbled up the stock despite the company's often secondary mission to turn a profit. Amazon attempts to undercut rivals by offering lower prices.

"He's almost alone with Steve Jobs and Bill Gates in this rare generation of founders who were able to predict the future," said Brad Stone, a senior executive editor at Bloomberg Technology and author of "The Everything Store: Jeff Bezos and the Age of Amazon."

Amazon has been able to pour money into new investments and technology and bulldoze over competition because investors have bought into the plan Bezos first laid out in his 1998 shareholder letter: "We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability consideration," he told investors 20 years ago.

Related: Amazon's corporate bulldozer is fueled by Wall Street

Amazon's expensive price tag isn't a concern for investors either. Shareholders are willing to pay $222 for every $1 of earnings. The average price to earnings ratio for S&P 500 companies is under 20.

"There's a certain audience that will pay a premium for growth," Hottovy said.

Bezos takes risks and experiments in ways that would look puzzling for other companies. Investors cheer when Amazon enters a new industry or region because it means another way for Amazon to take market share from competitors and grow sales.

"Bezos and Amazon have proved themselves able to mint new businesses," Stone said.

-CNNMoney's Chris Isidore contributed to this story.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 91935

Reported Deaths: 2780
CountyConfirmedDeaths
Hinds6903153
DeSoto532153
Harrison368771
Jackson334367
Madison318086
Rankin313473
Lee254066
Jones236078
Forrest231069
Washington215671
Lafayette203039
Lauderdale1984123
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Oktibbeha173749
Lamar156633
Neshoba1524103
Panola140926
Sunflower138543
Lowndes138457
Warren136650
Leflore134380
Pontotoc120416
Pike120148
Monroe117665
Scott115925
Copiah115433
Coahoma110927
Holmes108458
Marshall106714
Grenada104535
Lincoln104453
Yazoo103429
Simpson100142
Union96524
Tate94537
Leake93535
Adams89135
Wayne87121
Pearl River84850
Marion83633
Covington79321
Prentiss78617
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Newton74722
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Attala63625
Chickasaw63524
Tippah63516
Walthall58925
Clay56216
Hancock55420
Noxubee54015
Jasper53615
Clarke52538
Smith51714
Calhoun50612
Tunica47213
Montgomery45020
Claiborne44916
Lawrence42212
Yalobusha41314
Perry39016
Humphreys36915
Quitman3625
Stone34611
Greene33516
Webster32813
Jefferson Davis32211
Carroll30812
Amite30710
Wilkinson30117
Kemper28515
Sharkey25812
Jefferson2359
Benton2151
Franklin1863
Choctaw1775
Issaquena1033
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Alabama Coronavirus Cases

Confirmed Cases: 128097

Reported Deaths: 2264
CountyConfirmedDeaths
Jefferson18648332
Mobile12949288
Montgomery8560170
Madison736573
Tuscaloosa7015112
Lee558259
Shelby550149
Baldwin502148
Marshall376342
Etowah326344
Calhoun321139
Morgan312925
Houston260621
Elmore247547
DeKalb230119
St. Clair218134
Walker217780
Talladega199925
Limestone191919
Cullman180017
Franklin172728
Dallas172526
Russell16912
Autauga162424
Lauderdale159231
Colbert157224
Escambia154324
Blount150413
Jackson146610
Chilton143325
Dale128042
Covington127027
Coffee12388
Pike11329
Tallapoosa112483
Chambers110642
Clarke104417
Marion91428
Butler90238
Barbour8097
Marengo69319
Winston68512
Lowndes64327
Pickens62214
Bibb6179
Hale60828
Bullock58514
Randolph58512
Lawrence57620
Monroe5708
Washington54513
Geneva5404
Perry5356
Wilcox52911
Cherokee52816
Clay5187
Conecuh51611
Crenshaw51531
Macon46619
Henry4524
Sumter41719
Fayette4128
Choctaw34212
Lamar3302
Cleburne3116
Greene29915
Coosa1573
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