Amazon’s new deal with the post office cuts package delivery — but not as much as feared

Amazon $AMZN and the U.S. Postal Service have reached a new package delivery agreement that will reduce Amazon's shipping volume with the agency by 20%, well short of the two-thirds cut Amazon had threatened, according to a new report.

The Wall Street Journal reports that under the terms of the agreement, USPS will continue handling upward of one billion Amazon shipments each year. Reuters, citing two unnamed sources, reports that Amazon, USPS's single biggest client, pumps about $6 billion a year into an agency operating on an approximately $80 billion budget.

"We're pleased to have reached a new agreement with USPS that furthers our longstanding partnership and will let us continue supporting our customers and communities together," an Amazon spokesman told The Journal in a statement. USPS did not immediately comment.

Before taking effect, the deal must clear a regulatory hurdle: sign-off from the Postal Regulatory Commission, which has oversight authority over USPS.

The deal follows a period of sharp tension between the two parties. The friction began when USPS shifted course and launched a competitive bidding system for last-mile delivery access, a change Amazon publicly pushed back against, saying it came after more than a year of direct contract talks. In that bidding process, Amazon proposed cutting its volume by two-thirds. When competing bids failed to meet USPS's financial targets, the agency returned to one-on-one talks with Amazon, accoridng to The Journal.

The stakes were particularly high for USPS. The agency disclosed last month that its cash reserves could be exhausted by October, underscoring how much it depends on Amazon's business to stay afloat. USPS has accumulated $118 billion in net losses going back to 2007. Deeply slashing USPS volume would have complicated Amazon's own operations, particularly given how much the company depends on postal delivery to reach customers in remote regions that commercial carriers largely bypass.

Amazon had been preparing for multiple scenarios, including expanding its own delivery network and reaching out to smaller carriers to absorb displaced volume. The company had already announced plans to pour over $4 billion into building out rural delivery capacity across the U.S., a buildout it expects to complete by the close of 2026. Reuters reports that the new agreement gives Amazon room to keep growing its logistics footprint, though not to the point where it could match the postal service's nationwide, door-to-door coverage.