Vietnam’s Textile and Garment Industry: Growth Outlook 2026

Vietnam’s textile and garment industry is a key pillar of its economy. It employs roughly 2.7 million workers and accounts for around 16% of Vietnam’s export earnings. After a period of global disruption, the sector rebounded strongly in 2025 – exports reached about $46 billion (up ~5–7% yoy) with a record trade surplus (~$21 billion). This performance cements Vietnam’s position as the third-largest apparel exporter (behind China and Bangladesh). For context, Vietnam’s textile and garment export value grew from ~$35 billion in 2020 to roughly $46 billion in 2025 (CAGR ~5.6% from 2021–25). Industry surveys report Vietnam’s textile and garment exports will near $48 billion by year-end 2026. However, profit margins remain pressured by rising costs and U.S. tariffs (20–40%) on Vietnamese apparel.

Growth Drivers

Vietnam’s textile and garment industry growth is underpinned by several structural factors:

• Global FTA network: Vietnam has signed 16+ trade agreements (EVFTA with the EU, CPTPP, RCEP, UK–Vn, etc.) – more than any regional peer – improving market access. These FTAs give duty-free/quota-free access to key markets (EU, UK, Asia-Pacific), enhancing export competitiveness.
• Sourcing diversification: Multinational brands are diversifying away from China, favoring Vietnam’s stable business climate and relatively lower labor costs. For example, Vietnam became the top U.S. apparel supplier in early 2025, with ~$9.5 billion of U.S. imports (Jan–Jul 2025) – a 17% jump year-on-year. By contrast, China’s apparel shipments fell 21% to $6.9 billion.
• Investment in technology: Facing rising wages (~$300/month vs. ~$95 in Bangladesh, ~$145 in India), Vietnamese firms are adopting automation and modern machinery to boost productivity. Government and industry groups encourage digital transformation; major factories now use AI, robotics and advanced sewing systems.
• Upgraded product mix: The sector is shifting from low-end cut-make-trim (CMT) to higher-value segments. Apparel exports (T-shirts, jackets, etc.) now dominate (~80% of revenues), and “technical” textiles and value-added fabrics are growing. Many firms are moving from pure OEM to ODM/OBM, developing local brands and design capability.

Growth drivers also include rising domestic consumption (see below), strong government support (incentives, training programs) and a more skilled workforce. Notably, Vietnam’s average garment worker wage (~$300/month) is higher than Bangladesh (~$95) or Cambodia (~$190), which encourages productivity gains and investment in training. On the raw-material side, slowly improving localization – about 52–60% of inputs produced domestically – reduces some dependence on imports.

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Export Performance and Markets

Vietnam’s textile and garment exports hit ~$46 billion in 2025, up about 5–6% over 2024. This was fueled largely by strong sales of apparel (about $38 billion, ~80% of value). For 2024, Vietnam earned ~$44 billion (11% growth); the industry targets $47–48 billion in 2026 (6–9% growth). Key export destinations are:

• United States: The single largest market. In Jan–Sep 2025 Vietnam shipped over $13.4 billion of textiles/garments to the U.S., ~50% of its exports. The U.S. is diversifying its supply base (Vietnam’s share of U.S. apparel imports reached 20.6% Jan–Jul 2025). However, U.S. “reciprocal” tariffs on Vietnam (20–40%) and anti-transshipment measures pose a headwind.
• European Union: The EU is another major market. Vietnam’s apparel exports benefit from the EVFTA (removal of duties on most items), though complex rules of origin require up to 70% local inputs. EU sales slowed due to lower orders in late 2023–2024, but modest recovery is underway. (By contrast, Bangladesh – an LDC – enjoys full EU duty-free access under Everything-But-Arms.)
• East Asia: Japan and South Korea are steady buyers (2024 shipments ~$3.3B to Japan, $2.2B to Korea), thanks to FTAs (Japan–Vietnam, Korea–Vietnam) and “middle-to-high” fashion demand. China remains both a competitor and customer (Vietnam exports fabrics/yarns to China, while China imports Vietnamese apparel under ASEAN-China FTA).
• Other markets: South Asia, Middle East and Africa are emerging. For example, exports to Islamic economies reached ~$1.0B in 2024, and sharp tariff cuts in Sri Lanka, Bangladesh, and Pakistan have opened new opportunities. Regional FTAs like RCEP (ASEAN+China/Japan/Korea/Australia/NZ) also facilitate trade within Asia.

Table: Regional Export Profile & Competitor Comparison (textiles/garments)

Country	2024–25 Exports (US$)	Garment Wage (USD/mo)	Textile Workforce	Key Trade Deals
Vietnam	~$44–46 billion	~$300	~2.7 M	EVFTA, CPTPP, RCEP, US-Vn trade deal
Bangladesh	~$47 billion (FY2022-23)	~$95	~4–5 M	EU-EBA (duty-free), GSP; negotiating FTA
China	~$172 billion (2023, apparel&textile)	~$500–650	Tens of millions	RCEP, ASEAN-China FTA, no US/EU deal
India	~$15 billion (2023)	~$145	~45 M	UK-India CECA, limited GSP access

Sources: WTO and industry reports.

Domestic Market Outlook

While exports dominate, the domestic market is a growing focus. Vietnam’s rising middle class and retail growth (e-commerce sales surged) are driving more local consumption of clothing and textiles. Industry leaders note the long-overlooked home market is now a “promising frontier”. The government and businesses encourage “Vietnamese Brands for Vietnamese Consumers,” spurred by a patriotic “Buy Local” movement. Key trends:

• Brand-building: Companies are moving beyond OEM contracts to develop own brands and design. As one executive noted, “We cannot continue with just contract manufacturing. Businesses must control their own brands, invest in design…”. In practice this means ramping up in-house product development and using e-commerce/social media as strategic channels.
• E-commerce boom: Vietnam’s retail market is booming (~$269 billion in 2025, +9–10% YoY), with online fashion growing fastest. Domestic textile firms are partnering with major online platforms to reach consumers nationwide.
• Policy support: The government is promoting the industry’s share of domestic demand (targeting $8–9 billion by 2030). Initiatives include “fashion weeks,” trade fairs, and incentives for higher value-added products. Improving intellectual property protection also encourages brand investment.

Despite opportunities, domestic players face stiff competition from cheaper imports (China, Cambodia) in low-end goods. Local retailers and the Ministry of Industry and Trade are setting up dedicated “textile product hubs” and promotional campaigns to boost the national industry.

Foreign Direct Investment and Financing

Vietnam remains a magnet for foreign investment in textiles. In 2018–2025, the country attracted 65 greenfield textile projects (mostly garment factories) valued at over $4.6 billion – more than any other country in the region. Annual FDI inflows are very large: in 2025 newly-registered FDI hit $38.4 billion (all sectors), with manufacturing/processing drawing ~56% of new capital.

Singapore, China (and Hong Kong), Japan and Korea are the top investors. Notably, many investments are relocating from China: global brands and Chinese companies alike are building garment plants in Vietnam to bypass U.S. tariffs and be closer to markets.

Financing remains a critical enabler. Government policy encourages banks to lend to exporters and to OEMs upgrading technology. Recent reforms (e.g. faster loan processing, guarantees) have slightly improved firms’ access to capital. Nonetheless, high interest rates (despite easing in 2025) and collateral demands still constrain small suppliers. Industry bodies are pressing for export-credit lines and duty-drawback facilities, especially for companies moving up the value chain.

Supply Chain and Production Dynamics

Vietnam’s textile supply chain has many strengths (a skilled workforce, well-developed garment clusters in the north and south) but also vulnerabilities:

• Raw material dependence: The country must import nearly all cotton and synthetic yarns – roughly 95–100% of fibers come from abroad. Similarly, over 60% of fabrics in exports are foreign-made. This supply-gap forces heavy reliance on global markets (primarily China, India, South Korea) for inputs. Rising global cotton prices or export restrictions in those countries can immediately inflate costs. To counter this, Vietnam is gradually expanding domestic spinning/weaving (Vinatex plans dozens of new plants) and sourcing more fibers from alternative markets (Vietnam has signed agreements with Uzbekistan and Australia for cotton). The localization rate has improved to ~52–60% for fabrics, but further backward integration is needed.
• Production capacity and costs: Vietnam has about 3,000 textile firms (spinning/weaving) and over 5,000 garment factories nationwide. Labor costs have been rising (~10% per year), narrowing Vietnam’s cost advantage. Studies show overall production costs are 40–45% higher in Vietnam than in Bangladesh or Indonesia (though Vietnam’s labor productivity is also higher). These higher costs erode margins in basic goods. Moreover, logistical bottlenecks (container shortages, high freight rates, port congestion) have added to lead times and expenses.
• Modernization and flexibility: In response, many producers are adopting lean manufacturing and technology. Firms report that with new automation, one worker can produce 4–5 times more per day than before, offsetting some wage rises. Quick-response inventory management (near-shoring of inputs) is another focus: some companies are locating fabric cutting or washing operations close to customer warehouses in the U.S. and Europe, to shorten transit times. Overall, Vietnam’s apparel output capacity (value of shipments) is roughly $46B annually, compared to Bangladesh’s ~$47B and India’s ~$15B.

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Sustainability and Green Initiatives

Global apparel buyers increasingly demand environmental responsibility. The Vietnamese textile and garment industry has responded with multiple initiatives:

• Green factories: Leading producers are installing wastewater treatment and energy-saving systems. Hundreds of factories now have ISO 14001 or LEED certification. For 2026, many major exporters are investing in rainwater recycling, solar power panels, and waterless dyeing machines. Vinatex (the national textile group) aims to complete a “green fashion” transformation: developing circular production (recycling fabrics), traceable supply chains, and use of eco-fibers.
• Sustainable supply chain: There is a push to reduce carbon and chemical footprints. Vietnam has partially aligned with international schemes (e.g. Leather Working Group certification for tanneries). Major brands (Nike, Adidas) now require Vietnamese suppliers to meet stringent labor and environmental audits. A new EU regulation (EUDR) will soon demand deforestation-free sourcing, so Vietnam’s textile industry is exploring domestically-available non-wood fibers (bamboo, hemp, and recycled cotton) as substitutes.
• Industry targets: The government and VITAS have set long-term goals for green growth. By 2030, they aim to use >60% domestic input, reduce greenhouse gas intensity by 30%, and raise the share of recycled fibers. Many industry conferences now emphasize “greening and digitization” as core pillars. These efforts not only meet buyer requirements but also reduce long-term costs (water savings, waste reduction), representing an opportunity for the sector.

Competitive Landscape – Regional Comparison

Vietnam competes closely with Bangladesh, China, and India in global garment sourcing. Key contrasts include:

• Labor costs: Vietnam’s higher wages (~$300/month) make it more expensive than Bangladesh (~$95) and India (~$145), but lower than China ($500–$650). However, Vietnam’s productivity is higher, and it avoids the labor shortages that occasionally hit Bangladesh. China’s rapid wage inflation has prompted many factories to relocate to Vietnam and Cambodia.
• Scale and capacity: Bangladesh boasts the largest garment workforce (~4–5 million workers, 4,500+ factories) and over $47 billion in exports (mostly ready-made garments). India has an enormous textiles base (45 million workers, huge spinning capacity) but exports only ~$15 billion (many fabrics are consumed locally). Vietnam is in between: smaller workforce and factory count than Bangladesh/India, but strong output.
• Export volumes: China is the dominant global textile exporter (over $200 billion), while Bangladesh ranks #2 (mostly garments) and Vietnam #3. Bangladesh’s low costs (and LDC tariff benefits) have kept its prices highly competitive in basic apparel. India’s output is largest in fiber and yarn, but its apparel exports trail. Vietnam’s strength is in nimble mid-value fashion; Vietnamese factories can pivot faster to styles than Bangladesh, often yielding 10–15% shorter lead times.
• Trade agreements: Vietnam’s extensive network (EVFTA, CPTPP, RCEP) generally offers more market access. For example, Vietnam’s EU FTA eliminates duties on most items, whereas Bangladesh currently relies on the EU’s Everything-But-Arms preference (duty-free as an LDC until 2029). India is not in RCEP and has limited FTAs (e.g. CEPA with UK recently), so it faces higher tariffs in some markets. China benefits from the China–ASEAN FTA and RCEP but no preferential access to the U.S./EU.
• Compliance and image: Bangladesh’s industry has gained attention (both positive and negative) for its low cost and increasing compliance (many LEED-certified green factories). Vietnam’s factories are generally seen as high-quality and reliable (Vietnam is now the #1 supplier for U.S. brands). India is improving compliance and offers a highly integrated supply chain (90% of raw materials domestic), but U.S. tariffs (raised to 35–50%) have recently eroded its price competitiveness.

Key Challenges and Opportunities

Challenges: The main constraints for Vietnam’s textile and garment industry in 2026 include:

• Rising costs and input dependence: Wage inflation has eroded Vietnam’s low-cost edge, while global cotton/energy price hikes have raised expenses. Nearly all fibers and dyes are imported, leaving firms exposed to foreign exchange and trade policy risk.
• Tariff and trade uncertainty: New U.S. trade measures (higher tariffs on transshipment) and potential “China+1” scrutiny create instability. Buyers are also wary of anti-subsidy and safeguard actions, forcing firms to strictly comply with rules of origin and labor standards.
• Infrastructure and logistics: Domestic supply chains remain fragmented (small auxiliary sector). Continued reliance on trucking and ports means higher lead times and costs compared to coastal neighbors like Bangladesh (which ships from Chittagong). Any surge in orders could stress capacity.
• Environmental compliance: Stricter international regulations (e.g. EU deforestation-free rules, U.S. EPA proposals for garment factories) require rapid upgrades. Meeting these sustainably demands investment; smaller suppliers may struggle with the upfront capital for green technology.

Opportunities: Despite these headwinds, Vietnam’s textile and garment industry has several promising avenues in 2026:

1. Market diversification: Moving beyond saturated markets (EU, US) into emerging regions can drive growth. African, Middle Eastern and Latin American retailers are sourcing more from Asia. As the US and EU brands shift orders, Vietnam can step in by offering quicker delivery and flexible production runs.
2. Product and value-upgradation: Vietnam can capitalize on its higher-end niche. Technical textiles (e.g. sportswear, medical fabrics) and fashion clothing with design differentiation are growing trends. Brands like Nike and H&M have already shifted premium lines to Vietnam. Developing home-grown fashion brands could capture domestic and regional demand.
3. Sustainability leadership: By continuing its green push, Vietnam can become a preferred supplier to ESG-conscious buyers. For instance, offering “green” apparel (organic cotton, recycled fibers) could command price premiums and secure long-term contracts. Government facilitation of sustainability projects (credit for clean tech, green financing) would amplify this.
4. Enhanced productivity: Further automation and skills training can offset high labor costs. The industry aims to reduce headcount per unit of output by 30–40% through robots and IT systems. This productivity drive will be crucial to maintaining margins.
5. Digital commerce and innovation: Leveraging Vietnam’s tech-savvy population, textile firms are using AI for design, digital management platforms for factories, and e-commerce for direct sales. These tech investments can create new efficiencies and revenue streams.

In summary, Vietnam’s textile and garment industry enters 2026 in a position of strength, backed by robust export growth, solid government support, and a strategic push up the value chain. Yet it must navigate the challenges of higher costs and complex trade rules. The coming year will test its ability to transform – through digitalization, sustainability, and market expansion – into a more resilient, higher-value sector.