Vietnam's textile and apparel exports reached $17.8 billion in the first five months of 2026, a mere 0.6% year-on-year increase. This marginal growth signals that while overseas demand remains resilient, the sector's growth momentum is clearly decelerating.
Dual Squeeze from Costs and Competition
Data from the Vietnam Textile and Apparel Association (VITAS) shows that despite steady export volume, sluggish growth reflects deep structural changes in cost dynamics. Rising domestic labor costs are eroding the viability of the labor-intensive model that once drove growth. Meanwhile, competitors like Bangladesh and Cambodia are diverting global orders with even lower labor costs, intensifying homogeneous competition. For buyers, Vietnam is no longer the sole cost-effective destination; order flows are becoming more fragmented.
Green Barriers in Western Markets
The US and EU, Vietnam's two core export markets, are simultaneously tightening trade access rules. Updated standards on carbon emissions, renewable energy usage, and corporate social responsibility mean that green production capacity directly determines whether companies can retain orders. VITAS Chairman Vu Duc Giang noted that the path of relying solely on low prices to capture market share is narrowing. For domestic suppliers, this is a clear signal: failure to meet environmental compliance requirements could lead to exclusion from Western supply chains.
Upstream Weaknesses Limit FTA Benefits
Vietnam's textile and apparel supply chain has a localization rate of only about 50%, with core raw materials like fabrics and auxiliaries heavily dependent on imports. This structural shortfall prevents Vietnam from fully leveraging tariff reductions and trade facilitation benefits under various free trade agreements. In other words, even with FTAs in place with the EU, Japan, and elsewhere, high import costs for raw materials offset part of the export profits. Building an independent domestic raw material supply chain is key to enhancing export value.
Industry Adjustment Directions
In response, the Vietnamese government and industry associations have outlined three optimization paths:
- Investment guidance: Focus on high-tech production lines and environmentally compliant projects, phasing out outdated, energy-intensive capacity.
- Park upgrades: Scale up green textile industrial parks to create centralized, low-carbon, standardized production bases.
- Market diversification: Leverage existing FTAs to expand into emerging markets, reducing reliance on the US and EU.
These adjustments imply that Vietnam's textile and apparel exports will shift from volume-driven to quality-driven, altering the structure of orders.
Industry Outlook and Procurement Implications
Vietnam's textile and apparel sector has set a full-year export target of $50 billion, requiring approximately $32.2 billion in the second half—a significant challenge. Industry analysts believe that digital transformation, core technology upgrades, and green sustainable development will be the key engines for the next phase. For Chinese fabric suppliers, Vietnam's demand for upstream raw materials will not disappear in the short term, but the order mix will tilt toward high-end, eco-friendly products.