Vietnam's textile and garment industry exported $17.8 billion in the first five months of 2026, a modest 0.6% year-on-year increase. While overseas demand remains resilient, the growth momentum has clearly slowed. Achieving the full-year target of $50 billion depends on the industry's ability to navigate three major pressures: fading cost advantages, rising green barriers, and supply chain bottlenecks.
Dual Pressures of Costs and Competition
Official data from the Vietnam Textile and Apparel Association (VITAS) shows that the export growth rate in the first five months is far below the double-digit figures of previous years. Rising labor costs—with minimum wages increasing by about 7% annually—are a primary factor. Meanwhile, competitors like Bangladesh and Cambodia maintain lower labor costs and are steadily capturing global orders. Homogeneous competition has intensified, making the low-price bidding model unsustainable.
For buyers, this means Vietnam's price advantage is narrowing, while demands for delivery timeliness and product quality are rising. VITAS Chairman Vu Duc Giang stated that the industry must shift from cost competition to technological innovation and efficiency improvement, or risk losing buyer trust.
Green Compliance as a Hard Barrier
The EU and US are Vietnam's core export markets, but both are tightening regulations on carbon emissions, renewable energy use, and corporate social responsibility. Vietnamese companies that fail to meet these green compliance standards face direct order losses.
This is not a distant warning—the EU's Carbon Border Adjustment Mechanism is already in its transitional phase, and the US is advancing supply chain traceability legislation. Vietnam's green production capacity varies widely, with many small and medium-sized factories lagging in environmental equipment investment. Experts recommend that the government guide capital toward high-tech production lines and eco-compliant projects, and build scale green textile industrial parks to reduce the industry's carbon footprint collectively.
Upstream Weaknesses Limit Profit Margins
Vietnam's textile and garment industry has a localization rate of only about 50%, with core fabrics and accessories heavily reliant on imports from China and South Korea. This shortfall directly undermines the benefits of free trade agreements (FTAs)—rules of origin require a certain percentage of local content to qualify for tariff reductions.
For instance, under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, garments exported to Canada may face 6%-8% tariffs if fabrics are not locally sourced, compared to zero tariffs when local fabrics are used. Strengthening the upstream supply chain and building a self-controlled raw material system is crucial for Vietnam to boost export profits and market expansion.