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.
Exports are growing, while margins remain under pressure. Vietnam’s textile and garment exports reached approximately USD 46 billion in 2025, with the industry targeting around USD 48 billion in 2026. Rising wages, input costs and tariffs continue to constrain profit growth.
Vietnam is competing on speed, quality and compliance rather than low cost alone. Access to major markets through its FTA network, shorter lead times and consistent production quality are supporting the industry’s move into mid- to high-value apparel.
Green and digital capabilities are becoming standard requirements. Sustainability, automation and more efficient production processes are increasingly important for meeting the expectations of global buyers.
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 their supply chains beyond China, with Vietnam benefiting from its stable business environment and competitive labour costs. Between January and July 2025, U.S. apparel imports from Vietnam reached approximately USD 9.5 billion, up 17% year on year, making Vietnam the largest apparel supplier to the U.S. during the period. By comparison, apparel shipments from China fell 21% to USD 6.9 billion.
Investment in technology: Rising labour costs are encouraging Vietnamese manufacturers to invest in automation and modern production equipment. Average garment-sector wages are around USD 300 per month, compared with approximately USD 95 in Bangladesh and USD 145 in India. Government and industry groups encourage digital transformation; major factories now use AI, robotics and advanced sewing systems.
Upgraded product mix: Vietnam’s textile and garment industry is moving beyond traditional cut-make-trim (CMT) manufacturing towards higher-value products. Apparel such as T-shirts and jackets accounts for around 80% of industry revenues, while technical textiles and value-added fabrics are becoming more important. More manufacturers are also moving from OEM to ODM and OBM models, with greater focus on design, product development and building their own brands.
Rising domestic consumption, workforce development and government and industry support are also contributing to growth. Higher labour costs are increasing the focus on productivity, skills and technology.
Domestic sourcing remains an important priority. Vietnam’s textile and garment localisation rate is currently around 51–52%, leaving the industry dependent on imported materials. The government’s development strategy targets a localisation rate of 56–60% during 2026–2030.
Vietnam’s textile and garment exports reached around USD 46 billion in 2025, up 5–6% from 2024. Apparel accounted for about USD 38 billion, or roughly 80% of total export value. This followed exports of around USD 44 billion in 2024, an 11% year-on-year increase. The industry is targeting USD 47–48 billion in exports in 2026, representing growth of around 6–9%.
Key export destinations are:
United States: The U.S. remains Vietnam’s largest textile and garment export market. Between January and September 2025, Vietnam exported more than USD 13.4 billion of textiles and garments to the U.S., accounting for around half of the industry’s exports. Vietnam also held a 20.6% share of U.S. apparel imports between January and July 2025. Tariffs and tighter anti-transshipment measures, however, remain important risks for exporters.
European Union: The EU is another major market for Vietnam’s textile and garment industry. The EVFTA provides preferential tariff treatment for qualifying exports, helping improve Vietnam’s access to the European market. Exporters must also meet the agreement’s rules of origin to benefit from these preferences. After weaker orders in late 2023 and 2024, demand has shown signs of recovery. Bangladesh remains a key competitor in the EU market, supported by preferential access under the EU’s Everything But Arms scheme.
East Asia: Japan and South Korea remain established export markets, with Vietnam shipping around USD 3.3 billion to Japan and USD 2.2 billion to South Korea in 2024. Trade agreements with both markets support these flows, alongside demand for mid- to higher-value apparel. China also plays a dual role as both a competitor and trading partner, with Vietnam exporting fabrics and yarns to China while also supplying Vietnamese apparel under regional trade arrangements.
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 (2025) |
~$300 |
~2.7 M |
EVFTA, CPTPP, RCEP, US-Vn trade deal |
|
Bangladesh |
~USD 38.7 billion (FY2025–26, RMG) |
~$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 |
₹3.25 trillion (FY2025–26, textiles, apparel and handicrafts) |
~$145 |
~45 M |
UK-India CECA, limited GSP access |
Sources: WTO and industry reports.
While exports remain the industry’s main growth engine, Vietnam’s domestic market is becoming more important. Rising incomes, a growing middle class and stronger retail activity are supporting local demand for clothing and textiles. In 2025, Vietnam’s retail market reached around USD 269 billion, up 9–10% year on year, while e-commerce sales exceeded USD 32 billion. Government initiatives are also encouraging consumers to choose locally made products and strengthening the presence of Vietnamese brands.
Key trends:
Brand-building: Vietnamese manufacturers are moving beyond contract manufacturing to develop their own brands, products and design capabilities. More businesses are investing in in-house product development and using e-commerce and social media to reach domestic consumers directly.
E-commerce boom: Vietnam’s retail market reached around USD 269 billion in 2025, up 9–10% year on year. E-commerce sales grew by more than 20% to approximately USD 32 billion, accounting for nearly 12% of retail activity. Textile and fashion businesses are increasingly using online platforms and omnichannel models to reach consumers across the country.
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.
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 and 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.
Vietnam has a strong textile and garment manufacturing base, supported by a skilled workforce and production hubs in the north and south. However, the industry still depends heavily on imported materials and faces rising labour and logistics costs.
Raw material dependence: Vietnam still relies heavily on imported materials. Around 50% of textile and garment inputs are sourced domestically, while local fabric production meets only about 36% of demand. China remains a major source of textile materials, alongside India and South Korea. This dependence leaves manufacturers exposed to changes in global prices, supply disruptions and trade restrictions. Vietnam is increasing local spinning, weaving and fabric production to reduce its reliance on imports.
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: Manufacturers are investing in automation, digital systems and more efficient production to improve productivity and control costs. In 2026, Vinatex is targeting more than 5% growth in total factor productivity. Businesses are also improving inventory planning and making supply chains more flexible to shorten delivery times and respond faster to customer demand. Some manufacturers are moving selected activities closer to major customers in the U.S. and Europe to reduce lead times
Global apparel buyers increasingly demand environmental responsibility. The Vietnamese textile and garment industry has responded with multiple initiatives:
Green factories: Leading producers are investing in wastewater treatment and energy-saving systems solar power and more circular production methods. For 2026–2030, Vinatex aims for renewable energy to provide 10% of electricity use, while 100% of its enterprises meet environmental standards. It also plans to reduce energy use per unit of revenue by 1–1.5% .
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: Vietnam is working towards a more sustainable and locally supported textile and garment industry. By 2030, the country is targeting a 60% localisation rate for textiles, alongside greener production, digitalisation and more circular manufacturing practices. For businesses, this creates opportunities to improve efficiency, use more sustainable materials and meet changing buyer requirements.
Vietnam competes with Bangladesh, China and India for global garment sourcing, with each market offering different strengths.
Labor costs: Vietnam’s average manufacturing wages are around US$300 per month, higher than Bangladesh and India but lower than China. Higher productivity and a more stable labour supply help balance these costs, while rising wages in China have encouraged some manufacturers to move production to Vietnam and other Southeast Asian markets.
Scale and capacity: Bangladesh has a large garment manufacturing base, with around 4–5 million workers and more than 4,500 factories. India has a much larger textile workforce and strong spinning capacity, while Vietnam sits between the two, with a smaller production base but strong export output.
Export volumes: China is the dominant global textile exporter (over $200 billion), while Bangladesh ranks second (mostly garments) and Vietnam ranks third globally. Bangladesh’s low costs (and LDC tariff benefits) have kept its prices highly competitive in basic apparel. India is stronger in fibre and yarn while, Vietnam stands out in mid-value fashion, with factories often able to respond faster to changing styles and shorter production cycles.
Trade agreements: Vietnam benefits from a broad network of trade agreements, including the EVFTA, CPTPP and RCEP. This gives exporters preferential access to several major markets, while India and China have more limited access in some regions. Bangladesh continues to benefit from preferential access to the EU under its LDC status.
Compliance and sustainability: Bangladesh has made progress in factory compliance and green manufacturing, while Vietnam is known for reliable production and consistent quality. India benefits from a more integrated domestic supply chain, but recent tariff pressures have affected its competitiveness in some export markets.
Challenges:
The main constraints for Vietnam’s textile and garment industry in 2026 include:
Opportunities:
Despite these headwinds, Vietnam’s textile and garment industry has several promising avenues in 2026:
Vietnam’s textile and garment industry remains a major export sector in 2026, supported by strong manufacturing capabilities, broad trade access and continued investment in higher-value and more sustainable production. Rising costs, imported input dependence, changing trade rules and tighter buyer requirements are also shaping how manufacturers compete. For businesses, success in Vietnam increasingly depends on combining market access with stronger supply chains, productivity and long-term operational planning.
If you are considering entering, investing or expanding in Vietnam’s textile and garment sector, Ascentium can support you across market entry, corporate setup, tax, accounting and compliance. We help you understand the local requirements, assess the right structure and manage the practical steps needed to establish and grow your operations in Vietnam.