UPS to cut 20,000 jobs on reduced Amazon deliveries, as US tariffs weigh

By Abhinav Parmar, Lisa Baertlein

April 29 (Reuters) - United Parcel Service said on Tuesday it would slash 20,000 jobs and shut 73 facilities as part of a planned reduction in deliveries for Amazon.com, and amid U.S. President Donald Trump's tariffs that are roiling global trade.

A UPS UPS.N spokesperson said the layoffs are due to shedding 50% of shipping volume from Amazon.com AMZN.O, its largest customer, as well as ongoing cost-cutting and efficiency projects under a major operational restructuring.

An Amazon spokesperson said, "Due to their operational needs, UPS requested a reduction in volume and we certainly respect their decision."

The move comes as Trump's aggressive trade policies have begun slowing economic growth and increasing expectations for a possible recession.

UPS is contractually obligated to create 30,000 jobs under its current national master agreement with Teamsters, the union's general president Sean O'Brien said. "But if the company intends to violate our contract or makes any attempt to go after hard-fought, good-paying Teamsters jobs, UPS will be in for a hell of a fight."

UPS, in response, told Reuters that it plans to adhere to its contract. The company has a U.S. workforce of 406,000 workers, with more than 75% of them represented by unions, according to its latest annual filing.

"The world hasn't been faced with such enormous potential impacts to trade in more than 100 years," CEO Carol Tome said on the company's earnings call.

As the world's largest parcel delivery firm, UPS touches a broad swath of industries and is seen as a gauge for the global economy. FedEx FDX.N, its top rival, signaled a slowdown in March.

UPS aims to shelter profits by cutting $3.5 billion in 2025 with its latest overhead reductions. UPS also said a big percentage of the volume reduction from Amazon is money-losing work moving goods from fulfillment centers.

For the second quarter, UPS forecast a total-company operating margin of about 9.3% — below the double-digit margins investors like.

Its largest and most important U.S. business could see a roughly 9% drop in average daily packages handled and a low-single-digit percentage drop in revenue.

Shares in UPS closed down 0.4% on Tuesday, while rival FedEx FDX.N closed off 0.8%.

QUICK RESOLUTION OR SUPPLY SHOCK?

Earlier this month, President Trump slapped new 145% tariffs on many Chinese goods — escalating the standoff between the world's two largest economies.

U.S. import volume is roughly 400,000 pieces per day at UPS, less than 2% of the global average daily volume.

Still, the China to U.S. trade lanes are the most profitable for UPS and accounted for about 11% of UPS international revenue last year, Tome said.

UPS already is seeing an uptick in volume from Europe and other Asian countries including Vietnam and Thailand, UPS executives said.

Still, China is the factory of the world. If Trump's hefty China tariffs stick, fully replacing trade with China will take years.

Trump's current China tariffs could further slow already sluggish shipments between businesses. And, the small- and medium-sized business that UPS has targeted to offset that weakness could get hit particularly hard, since some of them source 100% of the goods they need from China, Tome said.

UPS is also reliant on deliveries for retailers, many of whom are heavily reliant on China.

Amazon itself sources from China, and 40% or more of the online retailer's marketplace sellers are based in that country. If U.S. consumers buy fewer goods from Amazon because tariffs make prices too high, UPS would suffer.

UPS also faces a sharp downturn in volume from China-linked bargain e-commerce sellers Temu PDD.O and Shein because the U.S. plans in May to end duty-free status for most of their packages coming to the United States. Temu already is tacking on an import charge at checkout, while Shein has added the tariffs to the price of goods.

Meanwhile, UPS and its retail customers have started planning for the vital peak winter holiday season, when daily deliveries can more than double.

In the best case scenario, the U.S. and China will soon come to an agreement that normalizes trade, UPS executives said.

In the worst case, the tariff fight continues, resulting in a supply shock, Chief Financial Officer Brian Dykes said.