Amazon’s Value Trumps Trump’s Threats
There’s been a feud of sorts between the tech industry and now President-Elect Donald Trump. The Tech Industry as a whole enjoyed a close relationship with the Obama administration and hoped to see that relationship flourish under a Hillary Clinton presidency. Now, shares are dropping for Amazon as Donald Trump has promised Amazon will have “such problems” if he’s elected. How big can those problems be? And is it time to dump Amazon?
What Will Happen to Amazon after Trump Wins the Election?
Top executives from companies such as Amazon and Salesforce openly criticized Trump during his campaign. Not only that, but they contributed 114 times more funds to Hillary Clinton. Now those companies face the next four years with a man in office who insists Google suppressed negative headlines about Clinton to help her campaign, wants to boycott Apple to bring manufacturing jobs back into the country, plans on going after Amazon for antitrust violations, and has Facebook in his sights for Mark Zuckerberg’s immigration policies.
With Trump having such a jaded view of tech, should investors be worried?
Yes and no.
Trump is known to hold a grudge. But while he can make things more difficult for these companies, the new president can’t singlehandedly bring them to ruin. His policies can be problematic, especially regarding immigration, labor, and overseas trade, all of which can raise costs for businesses. However, Trump has personally focused on Amazon and CEO Jeff Bezos.
During his campaign, Donald Trump accused Jeff Bezos of buying the Washington Post in 2013 to keep taxes low for Amazon and have political input. Trump also sees Amazon as a monopoly and was quoted in an interview as saying “if I become president, oh, do they have problems. They’re going to have such problems.” about Amazon. The Washington Post in turn assigned 20 reporters to cover Trump and look for dirt, eventually uncovering issues with Trump’s charity.
With Amazon shares down since the election, what damage can Trump do to Amazon as president?
In theory, Trump can focus on hurting Amazon in three areas: antitrust charges, forcing Amazon to collect sales tax in all 50 states, and international trade agreements.
As far as antitrust charges are concerned, Trump is trying to say Amazon is too dominant in online retail but would have to prove that Amazon’s practices have adversely affected consumer choice. But there is neither proof nor complaints about Amazon abusing its position.
Regarding taxes, Trump hasn’t actually mentioned sales tax so much as insisted Amazon is cheating on taxes and using the Washington Post as a write off to keep their taxes low. But sales tax is where Trump could affect Amazon. Currently, federal law states that online retailers do not have to collect sales tax in states where they do not have a physical store. For Amazon, this means about half the country. Amazon has stores in 23 states, meaning if Trump changed that law, Amazon would have to raise delivery costs to make up for the sales tax in those 27 remaining states. But Trump’s actual focus on Amazon and taxes is ironic because, with Trump’s new tax plan, Amazon would significantly benefit.
Finally, Trump has talked about renegotiating international trade agreements to be in America’s favor. His isolationist approach would raise tariffs on imports from China and around the world, affecting Amazon’s ability to have the lowest prices around. The effect of raising prices from higher tariffs could mean a loss of customers who are attracted to Amazon for savings. But those massive trade agreements take the time to renegotiate. The likelihood of any negotiations finishing in under two years is minuscule.
Watch this video from CNBC and find learn more about President-elect Donald Trump threat to Amazon.
Amazon (AMZN) shares may be on the way down for now, but expect shares to bounce back UP.
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