Vietnam's textile and garment industry posted a seemingly stable performance in the first five months of 2026: total exports reached $17.8 billion, a modest 0.6% year-on-year increase. However, behind this figure lies the immense pressure of an annual target of $50 billion and the urgent signal that the industry's growth model must undergo a fundamental transformation.
The Dual Squeeze of Costs and Orders
Data from the Vietnam Textile and Apparel Association (VITAS) shows that while overseas demand continues to support the export base, growth momentum has clearly weakened. The 0.6% increase contrasts sharply with the double-digit growth rates of previous years. The core reason is that Vietnam's long-reliance on low labor costs is rapidly eroding. As domestic labor costs rise, overseas buyers are increasingly demanding faster delivery times and higher product quality. The model of simply relying on low prices to secure orders is no longer viable.
Meanwhile, competing textile exporting countries such as Bangladesh and Cambodia are diverting orders in the global market. These countries also enjoy low labor cost advantages and are more price-competitive in certain categories. The intensifying homogenized competition means that unless Vietnamese textile and garment enterprises quickly pivot towards technological innovation, production efficiency improvements, and higher value-added products, they will struggle to maintain their current market share.
Green Compliance: A Hard Barrier in Western Markets
The United States and the European Union are Vietnam's two core export markets for textiles and garments, but both are simultaneously raising entry barriers. Standards for carbon emission control, renewable energy usage, corporate social responsibility, and environmentally friendly production are constantly being updated. Green production capacity is no longer a bonus but a hard requirement for securing orders from these markets. For the many small and medium-sized textile enterprises in Vietnam, the cost of environmental equipment and compliance certification is a significant burden, which is objectively accelerating industry consolidation.
Supply Chain Weaknesses Limit FTA Benefits
Vietnam's textile and garment industry has a long-standing weakness: the localization rate of its supply chain remains at only about 50%. Core upstream raw materials such as fabrics and accessories are heavily dependent on imports, preventing Vietnam from fully benefiting from tariff reductions and trade facilitation under various free trade agreements. Simply put, the model of processing imported materials for re-export limits Vietnam's advantages in FTAs and compresses export profit margins. Building a self-controlled domestic raw material supply chain has become crucial for the industry's sustainable growth.
Transformation Path and Practical Recommendations
Facing these challenges, industry experts have proposed a comprehensive optimization path. The government and industry associations need to guide investment towards high-tech production lines and environmentally compliant projects while phasing out outdated, energy-intensive capacity. Systematically developing green textile industrial parks to create centralized, low-carbon, and standardized production platforms is an effective way to raise the industry's overall green production level. Additionally, leveraging diversified FTAs to expand into emerging overseas markets can help mitigate trade risks from over-reliance on a single market.