Italian Wine Podcast host Juliana Colangelo welcomes Victor Schwartz to Masterclass US Wine Market. Victor is the founder of VOS Selections, a wine, spirits, and sake importer based in New York City since 1987. He has been in the news quite a bit recently for the legal case he helped establish against the most recent round of Trump tariffs against European imported products, most notably wine.
Juliana asks if Victor ever expected to see his company’s name in a Supreme Court case and he replies with a resounding no. When he began in 1987, he was, “just looking to find really interesting delicious wines, bring them back here, find a community that was interested in the same things that I was interested in, and sell them. And that’s what I’ve been doing for 39 years until this year.” Getting to the crux of the matter, Juliana asks how the case, ‘VOS Selections, Inc. versus Trump’ began and Victor explains that the Liberty Justice Center, a non-profit organization, is really behind the case. “I was introduced to Professor Ilya Somin, my nephew’s former law professor at George Mason University, which I always like to point out is the Antonin Scalia School of Law. I found out that Professor Somin was beginning a lawsuit against the tariffs. This was back in early March. Being in the wine industry, we’ve all been hyper aware of the tariff threat and we started meeting with the United States Wine Trade Association back last August out of concern about what could be coming down the pike. And, unfortunately, it did come. And when I heard about this lawsuit, I emailed Professor Somin, and we had a wonderful conversation, and he saidI had to talk to the lead counsel on this case, Jeffrey Schwab, which I did, like, couple of days later, explaining that we are on the front line as importers and we’re going to be most impacted by these proposed tariffs.” Victor’s plan was simply to inform the Center from an importer’s point of view; he had no intention of suing the government. However, the next day, Schwab asked him to join the case, along with a group of small businesses, all from different fields, all importers of other goods. Victor agreed to join and was shocked to be asked, a few days later, to be the lead plaintiff for the case.
Victor started thinking, “wow, this sounds serious and I had a lot of trepidation. I’ve looked at my family. And I know an AG in New York State, who understood the ramifications of being a lead plaintiff more than I did. But, at the end of the day, I just felt like here we are, all complaining about our inability to do anything about all the different things that were going on, and certainly specifically about the tariffs. And I just thought, well, if not me, who?”
Juliana commends Victor for being brave enough to take the risk of putting his name on the case. She points out that, while we know that the lawsuit argues that the International Emergency Economic Powers Act doesn’t authorize the imposition of tariffs in this context, we don’t know a lot more about the case. Victor says he thinks the Center chose his company as lead plaintiff because “our company and our industry is so clearly impacted negatively by these tariffs. They must have liked my story. They must have liked the way I was speaking about the story.” He later discovered, in a Wall Street Journal article, that the Liberty Justice Center is “a libertarian public interest law firm.This is what they do. They were really incensed by the power grab of this administration and they decided it is a really important case. So they wanted to find the right plaintiff, and a lot of people did not want to step up, because you can see how this administration operates. There’s a risk involved.”
The response to the case has been overwhelming, not only from the wine industry, but from all over. Victor says, “clearly this case has hit a very, very raw nerve. In America, in the wine industry, for small businesses, in foreigners, people are contacting me from around the world. In the Corriere della Sera newspaper, Italians love me. They’re saying David versus Goliath, it’s crazy. It’s heartwarming too, that this is such an important topic because it touches anybody and everybody, whether you’re in business or you see what’s going to happen to your little family farm.” Victor goes on to say that the response he has received from Italians has been much larger and more forceful than from any other demographic. “It’s as if they feel some connection. They are very passionate people in Italy.”
Julianna asks about the direct implications of the case for wine importers and Victor asserts that it is hugely impactful. He explains that most people don’t understand the importing business, they think importers are all about ten cents on the dollar profit; however, people in the wine business understand that, if an importing business achieves 5% net profit at the end of the year, that is basically what is expected. This is why a 10% tariff is completely destructive. He says, “despite what the administration thinks we can do, we have to eat that loss, our suppliers are going to eat it, and our suppliers are like us, they are small family farms. They can’t possibly absorb that. Anyone who is running a business knows that cash flow is the key item in terms of success. A tariff is a cash flow killer.” Victor describes the scenario step by step. “We have to pay that tariff right up front, at the port, before we have sold a single bottle. Even if we then raise the price ten percent to cover the cost of the tariff, we still don’t see that money back until we sell that container’s worth of wine. Larger companies have access to cash and they can do different things, but small companies don’t have that flexibility.”
The obvious solution to making up the shortfall caused by the tariff is to sell more. However, Julianna and Victor agree that wine is currently a contracting market already. Victor says he is already downsizing his inventory, his orders will be smaller, his support of his suppliers will be decreased. “We will focus on the products that are turning over,” he says. He comments that, if a product is not turning over quickly, as is often the case with more interesting, collectable, niche wines, then he will have to stop carrying those items. Another negative side of this coin is future investment in new business, which will have to be curtailed because the cash flow is now tied up in having to pay the government tariffs. Victor likens the situation to “a strongman coming in, a mob boss coming in and saying, hey, I want 10% off the top. It’s nasty. It adds a layer of business, it’s complex in terms of how everything gets to market, it’s resource intensive, and it’s extremely detrimental.”
Returning to the legal case, Victor acknowledges that the decision of the Supreme Court to hear the case was only step one in what is sure to be a long process. He anticipates appeals from the government, there is currently a stay on the decision, handed down from a district court in Washington D.C., and there will be another response after that deadline runs out. Asserting that he is not a lawyer, and not able to speak as an expert about the case, Victor feels strongly that the case needs to “go through the legal machinations of the courts, but I’m very confident that we are going to win regarding the particular case we are in, which challenges the authority of this administration.” Unfortunately, even if the case is won in favor of the plaintiffs, it is not the end of tariffs. Victor points out, “this was not the only way the administration can impose tariffs. They will go through Congress, which will be more cumbersome and there will be some nastiness coming. This is not the time to sit back and say we won. I am very concerned there will be tariffs in another method.”
Going forward, Victor is already talking to people about ways to organize, to use social media, and create a platform to keep the tariff issue, and the damage it causes, in the news. His goal is to “win in the court of public opinion,” and thereby force members of Congress to listen to their constituents, in order to stop tariffs. He calls the situation “an existential fight for our industry, for small businesses, both in America and overseas.”
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