Vietnam's textile and garment industry is undergoing a quiet but profound transformation. According to public data from the Vietnam Textile and Apparel Association (VITAS), the country's textile and garment exports reached $17.8 billion in the first five months of 2026, up just 0.6% year-on-year. This growth rate is far below the double-digit figures of previous years, reflecting a fundamental shift in the industry's underlying logic—the extensive model relying solely on cheap labor has hit its ceiling.
Slowing Growth and Cost Pressures
A 0.6% increase is not bad in the global textile export landscape. But against Vietnam's own target of $50 billion for the full year, the first five months' completion rate is only 35.6%, meaning the remaining seven months must average over $4.6 billion per month to meet the goal. The pressure is evident. VITAS Chairman Vu Duc Giang publicly stated that rising labor costs, coupled with stricter delivery timelines and quality requirements from overseas buyers, are squeezing the profit margins of Vietnamese factories. Meanwhile, competitors like Bangladesh and Cambodia, with lower labor costs and tariff advantages, are accelerating their diversion of global orders. Industry homogenization is intensifying, and the dividends of price competition have bottomed out.
Green Compliance Becomes a Hard Threshold
If cost issues are internal, then the green barriers from the EU and US are external pressure. The United States and the European Union are Vietnam's two most critical export destinations for textiles and garments. Both are tightening rules on carbon emission control, renewable energy usage, corporate social responsibility, and environmentally friendly production. For these markets, green production capacity has shifted from a bonus to a market access requirement. Vietnamese companies that fail to meet these standards risk losing orders or even being excluded from supply chains. This means the industry must simultaneously achieve two goals: reduce production costs and improve green compliance. These objectives are contradictory in the short term—environmental equipment investments often drive up manufacturing costs.
Upstream Weaknesses Limit Policy Benefits
Vietnam's textile and garment supply chain has a localization rate of only about 50%, with core raw materials like fabrics and accessories heavily reliant on imports. This creates a structural dilemma: despite signing multiple free trade agreements (e.g., CPTPP, EVFTA), Vietnamese companies often cannot benefit from tariff reductions because their imported fabric content exceeds the rules of origin thresholds. In other words, export volume growth has not translated into higher profits. Addressing upstream gaps and building a self-controlled domestic raw material supply chain is a prerequisite for unlocking the value of FTAs.
Transformation Path: From Low-Cost to Technology-Driven
Industry experts recommend three directions. First, the government and industry associations should guide investment toward high-tech production lines and environmentally compliant projects, phasing out outdated, energy-intensive capacity. Second, scale up the construction of green textile industrial parks, creating centralized, low-carbon, standardized production hubs to reduce individual companies' environmental upgrade costs. Third, diversify global market presence through multiple FTAs, exploring emerging markets in the Middle East and Africa to reduce over-reliance on the US and EU.