Vietnam's textile and garment industry posted a seemingly stable performance in the first five months of 2026, with exports totaling $17.8 billion, a modest 0.6% year-on-year increase. Behind this data lies the industry's struggle against rising costs, intensifying competition, and stricter regulations. Whether the annual export target of $50 billion can be achieved amid the pains of industrial transformation has become a focal point for Southeast Asia's textile supply chain.
Cost and Competition: Growth Bottlenecks Under Dual Pressure
Data from the Vietnam Textile and Apparel Association (VITAS) shows that export growth has slowed from double digits to single digits, not due to shrinking demand but to structural pressures on the supply side. Vietnam's labor costs have been rising steadily, with minimum wage increases averaging 5-7% annually in recent years, directly eroding its price advantage over competitors like Bangladesh and Cambodia. These countries are accelerating their share of global low-to-mid-end orders through lower labor costs and proactive industrial policies.
At the same time, international buyers are imposing stricter requirements on delivery timelines and product quality. The traditional model of relying solely on low prices and scale is no longer sustainable. Vietnamese textile enterprises must face the reality that global buyers now prioritize supply chain resilience, production flexibility, and compliance capabilities over price alone. This means the extensive growth model that has driven Vietnam's textile export boom over the past decade has nearly reached its ceiling.
Green Compliance: Upgraded Market Access Barriers in the US and EU
The United States and the European Union together account for over 60% of Vietnam's textile and garment exports. Both markets are simultaneously raising entry barriers. Carbon emission controls, renewable energy usage ratios, corporate social responsibility audits, and environmentally friendly production processes have become implicit clauses in purchase contracts. Companies that cannot provide traceable green production certificates risk losing orders.
This trend hits small and medium-sized Vietnamese subcontractors hardest. Upgrading production lines, adopting clean energy, and establishing carbon management systems require substantial upfront investment, which most companies lack. Industry data shows that less than 30% of Vietnamese textile companies have obtained international green certifications, meaning up to 70% of production capacity may face market access pressure within the next three years.
Upstream Weakness: Limited Benefits from Free Trade Agreements
Vietnam's textile and garment industry's local content ratio remains around 50%, with core raw materials such as fabrics, accessories, and dyes heavily dependent on imports from China and South Korea. This structural deficiency directly limits Vietnam's ability to benefit from multilateral free trade agreements. For example, under the CPTPP and EVFTA, rules of origin require textiles to be produced from yarn or fabric stages within member countries to qualify for tariff reductions. The lack of an upstream supply chain means many export products fail to meet these conditions, rendering tariff preferences ineffective.
This not only weakens the price competitiveness of Vietnamese products but also constrains export profit margins. Industry estimates suggest that increasing the upstream self-sufficiency rate to 70% could boost the overall export profit margin of Vietnam's textile and garment industry by 2-3 percentage points.
Transformation Path: From Low-Cost Competition to Systemic Capability Building
Facing these challenges, the Vietnamese government and industry associations are pushing for systematic adjustments. Investment is shifting from traditional capacity expansion to high-tech production lines and environmentally compliant projects. Plans are underway to build centralized, low-carbon green textile industrial parks to reduce individual companies' compliance costs.
In the upstream segment, efforts are being made to encourage local fabric research and chemical fiber production, gradually reducing dependence on imported raw materials. Additionally, through diversified free trade agreements, Vietnam is actively exploring emerging markets in the Middle East and South America to reduce over-reliance on the US and EU.