With $17.8 billion in exports in the first five months of 2026, Vietnam's textile and garment industry saw a meager 0.6% year-on-year growth, exposing the weakening of its growth engine. While overseas demand remains robust, structural contradictions within the industry are intensifying. Achieving the $50 billion annual export target is no longer simply a matter of order volume; it is a comprehensive battle over production models, supply chain resilience, and green compliance capabilities.
Growth Stalls Under Cost and Competition Pressures
Data from the Vietnam Textile and Apparel Association (VITAS) shows that the 0.6% growth rate is significantly lower than the average of previous years. The core reason is that Vietnam's long-reliance on cheap labor is rapidly diminishing. As domestic labor costs rise, overseas buyers are demanding faster delivery times and higher product quality, squeezing the margins of low-end manufacturing. Meanwhile, competitors like Bangladesh and Cambodia are diverting global orders with even lower labor costs and aggressive capacity upgrades, intensifying homogeneous competition. VITAS Chairman Vu Duc Giang stated that the path of competing solely on low prices is narrowing, and the industry must shift to a high-quality competition model focused on technological innovation, production efficiency, and higher value-added products.
Green Compliance as a Hard Requirement for Western Markets
The US and EU, Vietnam's two largest export markets, are tightening trade access rules. Carbon emission controls, renewable energy usage ratios, corporate social responsibility, and environmental production standards have become hard barriers for Vietnamese firms. Green production capacity is no longer a bonus but a prerequisite for maintaining market share in these regions. For small and medium enterprises, green transformation means high equipment and process upgrade costs. While larger firms have more capital, full-chain greening still takes time. If the industry fails to adapt quickly, Vietnam risks losing ground to competitors in Western markets.
Supply Chain Gaps Limit Free Trade Agreement Benefits
Vietnam's textile and garment supply chain localization rate remains at only 50%, with core raw materials like fabrics and accessories heavily dependent on imports. This structural weakness prevents Vietnam from fully leveraging the tariff reductions and trade facilitation benefits of various free trade agreements (FTAs). For example, despite an FTA with the EU, many Vietnamese garments cannot meet rules-of-origin requirements due to imported fabrics, thus missing out on tariff preferences and compressing export profits. Building a self-sufficient domestic raw material supply chain is urgent to reduce import dependency and unlock FTA value.
Transformation Pathways: From Policy Guidance to Industrial Upgrade
In response, the Vietnamese government and industry associations are adjusting strategies. Investment guidance will focus on high-tech production lines and environmentally compliant projects, while phasing out outdated, high-energy-consumption capacity. Large-scale green textile industrial parks are being planned to create centralized, low-carbon, standardized production platforms. Additionally, diversifying FTA portfolios is a priority; besides consolidating US and EU markets, Vietnam is exploring emerging markets to reduce single-market risk. Industry analysts note that while overseas demand provides a baseline, digital transformation, core technology upgrades, and green sustainability will be the main growth engines for the next phase.