Vietnam's textile and garment industry recorded 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. Behind this figure lies the support of overseas demand for the basic market, but the slowing growth has already sent a clear signal—the extensive growth model relying solely on cheap labor is approaching its ceiling.
Order Growth Sluggish, Squeezed by Rising Costs and Competition
Data from the Vietnam Textile and Apparel Association (VITAS) shows that the 0.6% growth rate is far below the double-digit increases seen in previous years. This means that while overseas procurement demand is still being released, Vietnam's substitution dividend in the global supply chain is narrowing. Rising labor costs, coupled with higher requirements from overseas customers for delivery timeliness and product quality, make the old model of 'low-price order taking' unsustainable. Meanwhile, competitors like Bangladesh and Cambodia, with lower labor costs and preferential trade policies, are diverting orders originally destined for Vietnam, intensifying homogeneous competition.
Green Compliance Becomes a 'Ticket' to European and American Markets
The United States and the European Union are two core export markets for Vietnam's textile and garments, but both are tightening access rules. Standards for carbon emission control, renewable energy usage ratios, and corporate social responsibility are being implemented one by one. Green production capacity has shifted from a bonus point to a hard threshold. For local Vietnamese enterprises, failure to achieve low-carbon and environmentally friendly production will directly risk losing orders. This means the logic of maintaining market share through scale expansion is no longer valid; environmental investment is no longer an optional cost but a survival necessity.
Supply Chain Weaknesses Constrain Profit Margins
The localization rate of Vietnam's textile and garment industry chain remains at only about 50%, with upstream core raw materials like fabrics and accessories heavily reliant on imports. This structural defect leads to two direct consequences: first, the inability to fully benefit from tariff reductions and trade facilitation under various free trade agreements, with export profits eroded by intermediate costs; second, insufficient supply chain resilience, making production schedules vulnerable to disruptions in international logistics or trade policies. Addressing upstream weaknesses and building an independent and controllable domestic raw material supply system has become a key action to break through growth bottlenecks.
Policy and Industry Synergy: Shifting from Price Competition to Value Competition
The optimization paths proposed by industry experts essentially constitute a systematic project for industrial upgrading. The government and industry associations need to guide investment toward high-tech production lines and environmentally compliant projects, phasing out outdated, high-energy-consumption capacity. Simultaneously, they should scale up the layout of green textile and garment industrial parks, creating centralized, low-carbon production carriers. The core goal of these measures is to shift Vietnam's textile and garment industry from 'cost advantage' to a comprehensive competitiveness of 'technology plus green'.
Practical Recommendations
For Buyers - When evaluating the green compliance capabilities of Vietnamese suppliers, prioritize their renewable energy usage ratio and carbon footprint data, rather than focusing solely on pricing. - Consider diversifying orders to factories with higher localization rates to reduce delivery risks caused by fluctuations in upstream raw material imports. - When signing long-term contracts with Vietnamese suppliers, include flexible clauses for environmental standard upgrades to ensure transparent cost allocation for future compliance.
For Foreign Trade Enterprises - Proactively engage with green industrial parks planned by the Vietnamese government to secure centralized environmental facilities and tax incentives upon settlement. - Accelerate the establishment of domestic supply chains for fabrics and accessories, or collaborate with local Vietnamese fiber enterprises to develop alternatives to imported materials, reducing dependence on overseas suppliers. - Leverage Vietnam's signed free trade agreements (e.g., CPTPP, EVFTA) to optimize export destination structures and reduce reliance on single markets.
Vietnam's $50 billion annual target for the textile and garment industry is not a number achievable through inertial growth. It requires simultaneous leaps in cost, green standards, and technology. For global buyers and foreign trade practitioners, understanding this transformation signal holds greater strategic value than focusing on short-term order fluctuations.