In the first five months of 2026, Vietnam's textile and garment exports reached $17.8 billion, a modest 0.6% year-on-year increase. Behind this figure lies both the resilience of overseas orders and a warning signal for industrial transformation.
Fading Cost Advantage and Reshaped Competition
The Vietnam Textile and Apparel Association has set an annual export target of $50 billion, requiring an average monthly export of $6.44 billion in the second half—28% higher than the first five months. Pressure comes not only from the base but also from structural cost increases. Rising domestic labor costs directly erode Vietnam's price competitiveness against rivals like Bangladesh and Cambodia. Overseas buyers are imposing stricter requirements on delivery time and product quality, making the low-cost model unsustainable.
Global order diversion is evident. Bangladesh continues to expand its share in basic garments due to lower labor costs and EU preferential tariffs; Cambodia is building a vertical “fabric-garment” chain by attracting Chinese fabric mills. If Vietnam fails to break out of homogeneous competition, its export growth will further slow.
Green Threshold Upgrade and Rising Compliance Costs
The US and EU, as Vietnam's two largest export markets for textiles and garments, are tightening access rules. Carbon emission controls, renewable energy usage ratios, and social responsibility audits are being updated, making green production capacity a decisive factor in retaining orders. For many small and medium-sized factories, the additional costs of environmental equipment and carbon footprint certification may squeeze already thin profit margins.
Notably, Vietnam's textile supply chain localization rate remains around 50%, with upstream fabrics and accessories heavily dependent on imports from China. This not only exposes delivery cycles to external supply chain fluctuations but also prevents Vietnam from fully utilizing rules of origin under free trade agreements, missing out on tariff reductions and customs facilitation. Under the EU's Carbon Border Adjustment Mechanism, the embedded carbon of imported fabrics will also be accounted for, further raising compliance difficulty.
Transformation Path: A Systemic Upgrade from Production to Supply Chain
The optimization directions proposed by industry experts amount to a systemic industrial upgrade. Governments and associations need to guide investment toward high-tech production lines and environmentally compliant projects, while phasing out outdated high-energy-consumption capacity. Building large-scale green textile industrial parks can create centralized low-carbon production hubs, reducing the cost of environmental upgrades for individual companies.
Filling the upstream supply chain gap is urgent. Vietnam needs to cultivate a domestic fabric industry cluster or attract high-quality overseas fabric mills to set up local factories, reducing dependence on imported raw materials. Only by achieving fabric self-sufficiency can enterprises truly benefit from free trade agreements and improve export profit margins.
Market diversification is equally important. While consolidating the US and EU markets, Vietnam should leverage signed FTAs like CPTPP and EVFTA to actively explore emerging markets in Japan, South Korea, and Australia, spreading single-market risks.