Vietnam's textile and apparel industry exported $17.8 billion in the first five months of 2026, up just 0.6% year-on-year. The figure appears stable but masks a growth slowdown driven by eroding cost advantages and tightening global trade rules.
Growth Engine Stalls: Dual Pressure from Costs and Orders
Data from the Vietnam Textile and Apparel Association (VITAS) shows exports of $17.8 billion in the first five months, with a full-year target of $50 billion. However, the 0.6% growth is far below the double-digit pace of previous years. Rising labor costs, combined with order diversion to competitors like Bangladesh and Cambodia, are undermining Vietnam's low-cost manufacturing model. Buyers are also demanding faster delivery and higher quality, further squeezing margins.
Green Barriers Rise: Stricter Access to EU and US Markets
The US and EU are Vietnam's core export markets, but both are tightening carbon emission controls, renewable energy requirements, corporate social responsibility, and environmental production standards. Factories that cannot offer low-carbon or carbon-neutral products risk being excluded from Western supply chains. Green production capacity has shifted from a 'bonus' to a 'threshold' for market access.
Supply Chain Weakness: Only 50% Localization Rate
Vietnam's textile supply chain localization rate remains around 50%, with key raw materials like fabrics and accessories heavily imported, mainly from China. This prevents Vietnamese firms from fully benefiting from free trade agreement tariff cuts and customs facilitation. For example, even under the EU-Vietnam FTA, products using non-originating fabrics cannot enjoy zero tariffs, eroding export profits. Building a self-sufficient upstream supply chain is critical to enhancing competitiveness.
Industry Transformation Path: Digitalization and Sustainability
In response, the Vietnamese government and industry associations have outlined three optimization paths:
- Investment guidance: focus on high-tech production lines and environmental compliance projects, phasing out outdated, high-energy capacity.
- Park upgrades: scale up green textile-industrial parks for centralized, low-carbon, standardized production.
- Market diversification: leverage FTAs to tap emerging markets like the Middle East and Africa, reducing reliance on the US and EU.
Industry analysts note that overseas demand still provides a base, but the next growth engine will shift to digital production transformation, core technology upgrades, and green sustainable development.