Earlier this year, package delivery giant UPS (UPS) unexpectedly announced a bold decision that will help it cut costs.
In January, the company revealed that it had reached an agreement with Amazon to reduce the online retail giant’s shipping volumes by over 50% by June 2026. The decision came after UPS saw a drop in revenue from Amazon between 2020 and 2024.
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“Amazon is our largest customer, but it’s not our most profitable customer,” said UPS CEO Carol Tom during an earnings call in January.
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Now that the plan is in full swing, UPS has just revealed that the domino effect of the Amazon volume decline will have a harsh impact on employees.
A UPS driver delivers packages in San Francisco, California.
Image source: Morris/Bloomberg via Getty Images
UPS announces a harsh move
As it scales back Amazon volume, UPS plans to reduce its total operational hours and cut thousands of jobs.
The shipping giant is planning to lay off 20,000 employees by the end of the year and will shutter dozens of its buildings within the next few months. Two-thirds of the building closures will take place in the eastern part of the U.S., while the remaining will happen in the west.
“We expect to reduce our operational workforce by approximately 20,000 positions during 2025 and close 73 leased and owned buildings by the end of June 2025,” said UPS in its first-quarter earnings report of 2025. “We are continuing to review our network and may identify additional buildings for closure.”
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UPS said that while these efforts may cost it between $400 and $600 million due to severance, lease-related costs, etc., it expects the initiative to generate $3.5 billion in total cost savings.
During an earnings call on April 29, UPS clarified that these job cuts, which will impact 4% of its workforce, will not be connected to the building closures and will be made across its entire U.S. network.
The last time UPS enacted mass layoffs was in January 2024, when it said it would cut roughly 12,000 employees worldwide throughout the year, in an effort to save $1 billion.
UPS spots concerning consumer trend
The latest round of job cuts comes when UPS is facing weakening consumer demand amid macroeconomic uncertainty following the looming threat of tariffs.
“In U.S. Domestic, following a strong January relative to our expectations, uncertainty in the market began impacting consumer behavior,” said UPS Investor Relations Officer PJ Guido during the call. “Demand shifted down in February, falling further than our expectations and normal shipping patterns and remained at that level in March.”
He said that the average daily volume (ADV) of packages in the U.S. declined by 3.5% year-over-year during the quarter, while ground ADV shrank by 2.5% and air ADV dipped by 9.6%.
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However, the number of shipments coming into businesses “surged” as they aimed to bolster their inventory before President Donald Trump’s tariffs take full effect.
Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price hikes.
On April 2, Trump announced a 10% “baseline” tariff on all countries importing goods to the U.S., with roughly 60 countries seeing higher tariff rates.
However, on April 9, Trump switched gears on his tariff plan and enforced a 90-day pause on reciprocal tariffs on all countries (except China), dropping them to a universal rate of 10%. He also hiked tariffs on China to a whopping 145%.
Trump’s tariffs are indeed causing anxiety among consumers, prompting them to change their shopping habits.
According to a recent Market Pulse survey from InMoment, 56% of the survey’s respondents expect prices for goods and services to increase due to Trump’s tariffs.
In response to these expected price hikes, 60% of respondents said they are contemplating changing their shopping behavior, with more expecting to shop less rather than more.
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