Vietnam's textile and garment industry posted a seemingly steady performance in the first five months of 2026: total exports of $17.8 billion, up 0.6% year-on-year. However, this figure masks the urgency of industry transformation. The Vietnam Textile and Apparel Association (VITAS) set an annual export target of $50 billion, meaning the remaining seven months must achieve $32.2 billion, or about $4.6 billion per month, far above the $3.56 billion monthly average in the first five months. Relying solely on the current model makes this target challenging.
Dual Pressure from Costs and Competition
Domestic labor costs in Vietnam continue to rise, making it no longer the world's cheapest production base. Meanwhile, competitors like Bangladesh and Cambodia, with lower labor costs and similar incentives, are diverting mid- to low-end orders. Overseas buyers are increasingly demanding delivery speed and product quality, making the low-price model unsustainable. VITAS Chairman Vu Duc Giang stated that the industry must shift from cost competition to technological innovation and value-added products.
Green Compliance as a Hard Threshold
The U.S. and EU are Vietnam's two core export markets, accounting for nearly half of total exports. These markets are tightening green trade rules, including carbon emission controls, renewable energy use, corporate social responsibility, and environmental production standards. For Vietnamese firms, green production capability is no longer a bonus but a threshold to retain orders from these markets. Non-compliant companies risk losing market share.
Supply Chain Gaps Limit Profit Margins
Vietnam's textile and garment supply chain localization rate is only about 50%, with upstream raw materials like fabrics and accessories heavily dependent on imports. This structural issue prevents Vietnam from fully benefiting from tariff reductions and trade facilitation under multiple free trade agreements, squeezing export profit margins. Industry experts suggest filling upstream gaps and building a self-controlled domestic raw material supply chain as key to improving competitiveness.
Transformation Directions and Policy Guidance
The government and industry associations have outlined optimization paths: selective investment in high-tech production lines and environmentally compliant projects, phasing out outdated high-energy-consumption capacity; scaling up green textile and garment industrial parks for centralized, low-carbon production; and leveraging diversified free trade agreements to explore emerging markets, reducing over-reliance on the U.S. and EU. Digital transformation, core technology upgrades, and green sustainable development are seen as the next growth engines.
Industry Impact and Market Expectations
Vietnam's transformation pressures offer lessons for China's textile industry. Chinese firms should watch for similar trends in labor costs and green compliance while seizing opportunities from Vietnam's demand for upstream raw materials, such as high-quality fabrics and accessories. For global buyers, the stability and compliance of Vietnam's supply chain will become key factors in order allocation.