The Blubber

United Parcel Service announced Tuesday that it will eliminate 20,000 jobs and shutter 73 facilities as part of a broader strategy to scale back deliveries for Amazon.com and adapt to the disruptions caused by U.S. President Donald Trump's trade tariffs.

A UPS spokesperson cited the decision to drop 50% of its shipping volume from Amazon—its largest customer—as a key reason for the layoffs. The cuts also stem from cost-saving and efficiency measures under a sweeping operational overhaul.

In response, an Amazon representative said, “Due to their operational needs, UPS requested a reduction in volume and we certainly respect their decision.”

The announcement coincides with the economic headwinds created by Trump’s tariff policies, which have slowed global trade and heightened fears of a potential recession.

"We haven’t seen such sweeping trade disruption in over a century," CEO Carol Tomé remarked during the company’s earnings call.

As the leading global package carrier, UPS serves as a bellwether for international commerce. FedEx, its chief competitor, also flagged slowing business in March.

To protect its bottom line, UPS is targeting $3.5 billion in cost reductions for 2025. A substantial portion of the dropped Amazon shipments were reportedly unprofitable, largely involving transfers from fulfillment centers.

For Q2, the company projected an operating margin of around 9.3%—below the double-digit margins typically favored by investors. In its core U.S. business, UPS expects a roughly 9% dip in average daily package volume and a low single-digit revenue decline.

Shares of UPS edged down 0.3% in early trading, while FedEx fell 1.1%.

Tariffs and Trade Tensions

Earlier this month, President Trump imposed new 145% tariffs on a wide range of Chinese goods, further straining U.S.-China trade relations.

While shipments from China make up under 2% of UPS’s daily global volume—about 400,000 packages—China-U.S. routes are among the company’s most profitable, contributing 11% of its international revenue last year, according to Tomé.

UPS has seen rising volumes from Europe and parts of Asia such as Vietnam and Thailand. Still, Tomé cautioned that China remains the world’s manufacturing hub, and replacing that supply network could take years.

The tariffs may especially impact small and mid-sized businesses that UPS has been targeting to cushion the drop in business-to-business shipments—many of which rely entirely on Chinese suppliers.

UPS also depends heavily on retail deliveries, and many major retailers source extensively from China. Amazon, for instance, relies on Chinese supply chains and has a large number of marketplace sellers based in the country. If rising prices from tariffs push consumers away from Amazon, UPS could take a hit.

Additionally, UPS is bracing for a volume drop from China-linked budget e-commerce platforms Temu and Shein. The U.S. plans to end duty-free treatment for most of their incoming packages in May. Temu has begun adding import fees at checkout, while Shein has incorporated tariff costs into product pricing.

Looking ahead, UPS and its retail partners have already started preparations for the critical winter holiday season, when daily package volumes typically surge.