The Vietnamese Textile and Garment Industry: Challenges and Opportunities

The textile and garment sector in Vietnam stands at a crossroads, facing both formidable challenges and promising opportunities. As the industry navigates high capital costs, logistics hurdles, and the increasing demand for eco-friendly practices, the resilience of Vietnamese textiles is being tested more than ever.

Growth Amidst Challenges

According to Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (VITAS), the industry’s export turnover reached an impressive $34.75 billion in the first nine months of 2025, marking a 7.7% year-on-year increase. This robust growth underscores the resilience of Vietnam’s textile exports in a competitive global market. Despite these gains, the reliance on imported raw materials remains a significant concern. The country’s import turnover totaled $16 billion, of which $11 billion was allocated for fabrics alone. Such dependency raises risks, especially as global trade dynamics continue to shift.

A Shift in Global Standing

Vietnam has ascended to the third position globally in textile and garment exports, transforming from a low-cost processing hub to a more sophisticated player on the world stage. Giang notes that an increasing proportion of exports now consists of high-value-added products, reflecting the industry’s gradual transition from mere contract manufacturing to active brand-building and innovation.

Currently, Vietnamese textile and garment products are shipped to 138 countries, bolstered by 16 free trade agreements (FTAs), a number projected to rise to 22 by 2027. Emerging markets in the Middle East and Africa, which were previously overlooked, are now becoming key areas for growth. In 2024, exports to Islamic countries reached $1 billion, while revenue from the Middle East hit $700 million by mid-2025.

The Costs of Production

Despite the positive growth, the industry grapples with rising production costs, which are estimated to be 40-45% higher in Vietnam than in neighboring countries like Indonesia, Malaysia, and Myanmar. Compounding this issue, even with Vietnamese labor being approximately 40% more productive, logistical expenses remain a major bottleneck.

According to Dang Thi Minh Phuong, Chairwoman of the Ho Chi Minh City Logistics Association, costs associated with shipping and warehousing have surged. The industry struggling to recruit skilled container drivers adds to this logistical strain, urging businesses to rethink their supply chain structures and invest in logistics technology.

Navigating New Purchasing Models

The transition from traditional processing models to Free on Board (FOB) and Delivered Duty Paid (DDP) purchasing methods has further altered the industry’s financial landscape. Giang emphasizes the importance of stronger cooperation between banks and exporters, urging financial institutions to create tailored credit packages that align with modern contract terms. He believes that transparency and trust are crucial for ensuring a stable capital flow to support growth.

Trade Policy Impacts

Trade policies are another pressing concern shaping the industry’s landscape. A recent imposition of a 20% reciprocal tax on Vietnamese textile and garment products by the US has begun to impact exporting dynamics. While initial demand remained steady as customers rushed to place orders ahead of the tax, new orders from the US have significantly declined. Furthermore, buyers are now requiring Vietnamese manufacturers to absorb part of the tariff costs, which consequently shrinks profit margins.

In addition, US authorities are signaling potential tax hikes on products lacking clear origin documentation, posing a warning to Vietnamese firms re-exporting goods from China. This increasing scrutiny highlights the importance of solidifying product origins in an evolving trade climate.

Local Input Gaps

India’s reliance on imports is stark, with 100% of cotton and up to 95% of synthetic fibers being sourced from abroad. Chemicals and dyes are also nearly entirely imported. This lack of domestic production creates vulnerabilities, particularly as origin rules tighten. To mitigate such risks, industry leaders advocate for an increase in the localization of raw materials, which would enhance traceability and decrease exposure to foreign supply shocks.

Despite impressive export numbers, brand development in Vietnam remains a persistent weakness. Vinatex’s general director Cao Huu Hieu notes that while Vietnamese fashion brands are still in their infancy, international brands have established dominance, even within the domestic market. Investment in design talent is crucial, as building a strong brand identity in the fashion industry requires long-term commitment to training, creative development, and product differentiation.

Embracing Automation and Innovation

While Vietnam has made significant strides in automation, its overall productivity still lags behind other leading textile producers in Asia and Europe. Investments in modern machinery, smart factories, and automation are pivotal to maintaining competitive standing. Hieu reflects on Vinatex’s strategic goal of evolving into a complete solutions provider for green fashion, focusing on sustainable and recycled products aligned with global trends towards eco-conscious consumption.

As Vietnam seeks to solidify its place in the global textile industry, a commitment to innovation, sustainability, and brand development will be critical. The future of this sector carries both challenges and transformative opportunities, requiring a concerted effort from all stakeholders involved.