If the U.S. Postal Service (USPS) were fully privatized, it would likely result in more frequent rate increases, reduced service days, and a restructured network resembling that of FedEx and UPS, according to industry experts.
Former President Donald Trump has proposed the idea of privatizing the nearly 250-year-old institution as part of efforts to address its financial losses. Elon Musk, CEO of Tesla and an influential figure in the Trump administration, also supported the idea during a recent Morgan Stanley conference, according to reports.
However, the prospect of privatization has drawn opposition from postal employees and lawmakers, who argue that it could jeopardize service in rural areas, raise costs, and threaten jobs within the agency. In a video message to USPS employees on February 25, Postmaster General Louis DeJoy acknowledged that any structural changes would ultimately be determined by Congress and the president.
“To the degree possible postal leadership will be involved, so that we ensure the nation’s leaders are aware of how future proposed changes may impact our organization’s ability to serve the American people,” DeJoy stated.
The State of USPS
USPS is already working toward financial stability through DeJoy’s 10-year “Delivering for America” plan, which involves various network adjustments aimed at reducing costs while increasing revenue from package deliveries. Despite these efforts, the agency continues to struggle.
In fiscal year 2024, USPS reported a loss of $9.5 billion, with 80% of the deficit attributed to factors beyond management’s control, such as unfunded pension liabilities. To address these challenges, DeJoy has advocated for administrative and legislative reforms, including changes to pension funding.
The Trump administration and lawmakers are now evaluating whether privatization—turning USPS into a profit-driven enterprise without regulatory constraints—would be beneficial for the country.
Despite its financial struggles, USPS remains a key component of the nation’s infrastructure. A 2018 report by a task force established during Trump’s first term emphasized that its delivery network “is a critical part of the nation’s infrastructure that cannot be replicated by private actors.”
Aaron Alpeter, founder of supply chain consultancy Izba, pointed out that defining USPS’s role is essential before making any structural changes.
“We have to really understand, what is the Post Office?” Alpeter said. “Is it meant to compete with commercial interests that are out there, or is meant to provide a safety net for things that commercial interests are not interested in?”
Currently, USPS faces operational constraints in its cost-cutting efforts. DeJoy noted last June that over half of its carrier routes operate at a loss. However, due to its universal service obligation, the agency cannot simply eliminate these routes, as it is legally required to deliver mail promptly and reliably across the country.
This obligation includes servicing costly-to-reach areas such as Hawaii, Alaska, and Puerto Rico. Anthony Pizza, Vice President of Growth and Innovation at SpeedX, a parcel carrier that also operates in Hawaii, highlighted the inherent cost challenges in reaching such locations.
“There’s a certain floor for the cost to move things there,” Pizza explained.
Unlike private courier companies, USPS does not receive tax funding to cover the added expenses associated with delivering to remote areas. Any changes to its universal service obligation would require oversight by Congress and the Postal Regulatory Commission.
Even if privatized, USPS could still be required to maintain certain service standards. For instance, the privatized Royal Mail in the United Kingdom is mandated to deliver and collect letters six days a week at affordable rates.
“If we’re going to keep the service standards as they are today, you have to be very realistic to think about what privatization can actually accomplish,” said Derek Lossing, founder of Cirrus Global Advisors and a former Amazon Logistics leader. “Again, if you look at the Royal Mail, I don’t think it’s accomplished nearly what they thought it could.”
Potential Changes Under Privatization
Experts predict that a privatized USPS would likely scale back its six-day-a-week delivery service in less profitable rural areas to cut costs. This would align with the agency’s existing cost-reduction efforts in remote regions.
Another major shift could involve significantly reducing USPS’s physical footprint of over 33,000 post offices. Lossing suggested that, like UPS, the agency could shift to using local businesses as pickup and drop-off locations instead of maintaining standalone post offices.
“Your footprint would look more like a UPS or FedEx,” Lossing noted.
Expected Rate Hikes
Privatization would also likely lead to more aggressive rate increases. Analysts at Wells Fargo estimated that USPS would need to raise parcel delivery prices by at least 30% to achieve financial independence. Their February 27 research report indicated that USPS’s pricing was 25% to 60% lower than FedEx and UPS in the fourth quarter of 2024, depending on the service.
“I don’t know how they would be able to sustain delivery with the current price structure,” said Helaine Rich, Vice President of Strategic Sales and Administration at ePost Global.
While raising prices and cutting service days might help USPS improve its financial outlook, experts warned that such measures carry significant risks, especially in package delivery. If USPS reduces delivery days in certain areas, businesses and consumers may increasingly turn to alternative carriers.
On the other hand, USPS’s ability to reliably deliver to rural communities remains a competitive advantage, particularly for e-commerce companies seeking nationwide coverage, according to Lossing.
The Wells Fargo report also pointed out that substantial rate hikes by a privatized USPS could benefit competitors like FedEx and UPS by “increasing the floor for” delivery rates. Additionally, higher postage costs could accelerate declines in mail volume as businesses and individuals seek digital alternatives.
The Road Ahead
Instead of fully privatizing USPS, the U.S. government could opt for a partial approach by keeping the mail business under federal control while privatizing the package delivery segment, which competes with private companies. Several experts believe such a model could limit disruptions to mail service while allowing for competitive efficiencies in package shipping.
“I don’t see it happening, obviously, on the letter mail side of things,” Rich said regarding privatization.
No matter the approach, transitioning to a privatized model would be a lengthy process. Mark Waverek, Managing Partner at PlaidMark Management and Consulting Services, compared it to the multi-year restructuring efforts seen in countries like Germany.
“You just can’t snap your fingers and turn it on tomorrow,” Waverek said. “This is going to take a well-thought-out process of what those cuts are going to be, what it’s going to mean to the people on the service side [and] what alternatives are going to be in place. It’s going to take time.”