USPS proposes fuel surcharge as Iran war drives up shipping costs

Driving the news: The temporary USPS surcharge, which requires approval from the Postal Regulatory Commission, would start April 26 and is set to run through Jan. 17, 2027.

• It would apply to packages, including Priority Mail and USPS Ground Advantage, but not letters or stamps. It's designed to offset rising fuel and transportation costs, USPS said in a statement Wednesday.

The big picture: FedEx and UPS have long relied on fuel surcharges that adjust weekly with diesel prices — and have climbed sharply as fuel costs rise amid the Iran war.

• USPS had resisted for decades, positioning itself as a lower-cost option — until now.
• Yes, but: UPS and FedEx surcharges now run roughly 20% to 25% of shipping costs, far higher than USPS's proposed 8% fee.

State of play: USPS is under mounting financial pressure.

• Postmaster General David Steiner recently warned lawmakers that USPS could run out of cash in less than 12 months without congressional action.
• Amazon, the Postal Service's biggest customer, plans to sharply cut the volume it ships through the agency, threatening billions in revenue.

• USPS says the surcharge is one step to stabilize its finances — and a bridge toward more permanent pricing changes, including potential stamp price increases.

What we're watching: USPS is a critical last-mile partner for e-commerce, especially for smaller retailers and third-party sellers.

• Even an 8% increase can squeeze already thin margins and may push retailers to raise prices or shipping fees.
• It also underscores how much Americans still rely on USPS for essentials — including prescription medications — particularly in rural areas.

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