Vietnam's textile and garment sector posted a seemingly stable performance in the first five months of 2026: exports reached $17.8 billion, up a modest 0.6% year-on-year. But behind this figure lies anxiety over the annual target of $50 billion and the pressure to transform.
Signs of Slowing Growth
The 0.6% growth rate is far below the double-digit increases of previous years, indicating that while overseas demand remains robust, the momentum is clearly weakening. Data from the Vietnam Textile and Apparel Association (VITAS) shows that export volumes are still expanding, but the narrowing growth margin suggests diminishing returns from traditional low-cost orders.
Rising labor costs are the primary constraint. Wages for Vietnamese workers increase by about 10% annually, directly compressing factory profit margins. Meanwhile, competitors like Bangladesh and Cambodia are diverting global orders with even lower labor costs, eroding Vietnam's price advantage in low-end markets.
Green Compliance: A Hard Barrier for Western Markets
The U.S. and EU are Vietnam's two core export markets for textiles and garments, together accounting for over 60% of total exports. But both markets are tightening access rules: carbon emission controls, renewable energy usage ratios, and corporate social responsibility audits are being implemented one by one.
For Vietnamese factories, green compliance is no longer optional; it's a hard requirement for retaining orders from Western buyers. VITAS Chairman Vu Duc Giang notes that the low-price model has run its course, and companies must invest in environmental equipment, clean energy, and production processes. This means short-term cost increases, but it's the only path to long-term competitiveness.
Supply Chain Gaps: Free Trade Agreement Benefits Hard to Capture
Vietnam's textile and garment industry has a localization rate of only about 50%, with key upstream materials like fabrics and accessories heavily dependent on imports, mainly from China. This structural weakness prevents Vietnam from fully leveraging the tariff reductions offered by its many free trade agreements (e.g., CPTPP, EVFTA). Rules of origin require a certain percentage of local content, but domestic fabric capacity is insufficient, forcing many orders to forgo preferential rates.
- Fabric import dependence: about 70% from China
- Accessory self-sufficiency: less than 40%
- FTA utilization rate: only about 30% of companies fully meet origin requirements
Transformation Path: From Cost Competition to Value Competition
Industry solutions focus on three directions: first, government-guided investment in high-tech production lines and environmental projects to phase out outdated capacity; second, building green textile industrial parks for centralized low-carbon production; third, establishing a self-sufficient domestic raw material supply chain to reduce import reliance.
For buyers, Vietnam's price advantage is narrowing, but delivery reliability and quality control capabilities are expected to improve.
For Buyers - Focus on Vietnamese factories with green certifications, such as ISO 14001 or GOTS, to mitigate EU market access risks. - Prioritize vertically integrated factories with in-house fabric production, which can better leverage FTA preferential rates and lower total procurement costs.
For Trading Companies - Explore local fabric partnerships or investments in Vietnam through joint ventures or technology transfers to increase fabric self-sufficiency and meet rules of origin. - Make green compliance capability a core criterion for supplier selection, helping overseas clients navigate new regulations like the EU's Carbon Border Adjustment Mechanism (CBAM).
Vietnam's textile and garment industry is at a turning point from "quantity" to "quality." Whether the $50 billion target is achievable depends on the industry's ability to transition from low-cost processing to high-value manufacturing amid rising costs, intensified competition, and higher compliance barriers.