Over the past 15 years, Vietnam’s textile and garment industry has undergone a remarkable transformation, emerging as one of the cornerstones of the country’s export-oriented manufacturing base and a major player on the global stage.

The industry was already establishing itself back in 2011, with exports reaching just under $14 billion, but by the early 2020s its reach and scale had expanded dramatically, driven by successive waves of trade liberalisation, foreign investment and integration into global supply chains.

By 2022, export revenues had tripled from a decade earlier to around $44 billion, placing Vietnam firmly among the world’s top three garment exporters and reflecting a long-standing compound annual growth that consistently outpaced many of its regional peers.

Competition
To put this in context, of the other major textile and garment manufacturing countries across Asia, China remains the benchmark, but its trajectory over the past decade has been fundamentally different.

In the early 2010s, China dominated global apparel exports by a wide margin, with annual export values well above $150 billion.

Over the subsequent decade, however, growth slowed markedly. Rising wages, tighter environmental regulations and a strategic shift towards higher-value manufacturing and domestic consumption all contributed to a gradual erosion of China’s share of low and mid-range garment exports.

While China remains the world’s largest exporter by value, its apparel exports have been broadly flat rather than strongly expanding, and in some years have declined, creating space for countries such as Vietnam to rapidly fill the gap.

Contrasts
Bangladesh offers a contrasting case. Its garment industry expanded strongly over the same timeframe, with exports rising from roughly $20 billion in the early 2010s to around $45 billion by the early 2020s, bringing it close to Vietnam in headline export value.

The structure of that growth, however, has been very different. The success of Bangladesh has been driven overwhelmingly by large-scale, low-cost garment assembly, particularly in cotton-based basic apparel, with far less diversification into higher-value products.

India’s performance over the same decade has been more uneven. Despite its vast domestic fibre base and long-established textile sector, India’s textile and garment exports grew only modestly, rising from around $30 billion in 2011 to the mid-$40 billion range by the early 2020s.

Structural challenges, including fragmented production, infrastructure bottlenecks and slower integration into global apparel supply chains, meant that India did not capitalise on shifting sourcing patterns as effectively as Vietnam, despite its advantages in cotton availability and scale.

Smaller Southeast Asian producers such as Cambodia and Indonesia also expanded, but from lower bases and at a slower pace. Cambodia’s exports roughly doubled over the decade but remained well below $10 billion, while Indonesia’s garment exports grew modestly and struggled to regain momentum after pandemic-related disruptions.

Triple exports
Against this backdrop, Vietnam’s tripling of exports between 2011 and 2022 stands out not simply for its scale, but for its consistency.

Vietnam has also capitalised on its competitive workforce and improving infrastructure to attract leading global brands seeking alternatives to traditional manufacturing hubs.

The industry’s contribution to national exports has grown markedly, with garments and textiles becoming one of Vietnam’s largest foreign-exchange earners, while employment in the sector swelled to several million jobs across urban and rural areas. Foreign direct investment has flowed into new factories and processing facilities, drawn by a combination of preferential trade arrangements and a reputation for quality and reliability.

Key trade agreements have reinforced this. Deals such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) reduced tariffs and opened up critical markets in North America, Europe and Asia, allowing Vietnamese producers to compete more effectively on price and delivery. Exports to markets such as the US and the European Union have grown steadily over the past decade, even when confronted by periodic global slowdowns.

Shocks in 2025
As mentioned, however, the pace of growth has not been uniform. The COVID-19 pandemic inevitably interrupted global supply chains and dampened demand, leading to temporary setbacks in 2020 and 2021. Nonetheless, Vietnam’s industry demonstrated resilience, rebounding strongly as global trade recovered and positioning itself as a preferred destination for medium-to-longer-lead manufacturing orders.

Then came 2025, in which Vietnam’s textile and apparel industry faced one of the most significant external shocks in its export history when the US, by then its largest foreign market, imposed sweeping tariffs on Vietnamese imports.

Vietnam actually became the largest supplier of apparel to the US in the first seven months of 2025, overtaking China for the first time ever as fashion brands diversified sourcing in response to initial tariffs on China by the US.

Between January and July 2025, the US imported almost $9.5 billion of apparel products from Vietnam, an increase of 17.5 per cent on the same period of 2024, according to the US Office of Textiles and Apparel (OTEXA) data. Apparel imports from China to the US dropped to $6.9 billion over the same period.

Strategic Adjustments
The consequences of the initial measures against China heavily impacted the entire sector, prompting urgent strategic adjustments, cost negotiations and diplomatic engagement as manufacturers and policymakers grappled with an uncertain trading environment.

Other major textile and apparel manufacturing countries, however, did not escape Donald Trump’s belief in tariffs, and in early August 2025, the US implemented a 20 per cent tariff on most textile and fashion goods imported from Vietnam, alongside a 40 per cent levy on products deemed to be trans-shipped from third countries.

These levies came after initial proposals for tariffs as high as 46 per cent on Vietnam, which were part of a broader set of trade measures introduced by the US government.

Impact
The immediate impact on Vietnam was stark. Exports of fashion and textile goods to the US dropped sharply once the measures took effect, with volumes down substantially in the months following implementation as buyers and brands recalibrated orders to mitigate cost increases.

This was visible in official customs data showing a monthly fall in exports from Vietnam to the US after August, with textile and garment shipments declining as retailers weighed price rises against demand flexibility.

Vietnamese factories felt these shifts on the ground in markedly different ways. Some producers were instructed to cut shifts or scale back work as US orders were postponed or cancelled entirely, illustrating the uneven response within the industrial base. By contrast, other plants ramped up output in anticipation of tariff windows, as brands rushed to ship goods before the levies took full effect.

Squeezed margins
A central issue has been the squeezing of profit margins. With a 20 per cent tariff now standard, many global brands sought to push part of the additional cost back onto Vietnamese suppliers rather than absorb it fully at the retail level. This has eroded margins for local manufacturers, especially at a time when production costs in Vietnam are already higher than in some competing countries in Southeast Asia.

The tariff environment has also heightened the complexity of rules of origin and supply-chain compliance.

Vietnam’s textile sector relies heavily on imported inputs, particularly fabrics and trims from China and South Korea. Under US rules of origin, goods incorporating inputs from non-FTA partners can face even higher tariffs if classified as trans-shipments, meaning some products potentially attract a levy of up to 40 per cent. This has sparked renewed attention to strengthening domestic upstream capabilities and improving documentation to avoid punitive classifications.

Diplomacy
Despite these challenges, the broader Vietnamese economy continued to grow through 2025, with resilient export performance outside the US market helping to cushion the blow. GDP growth accelerated to around 8 per cent for the full year, underlining the country’s ability to absorb external shocks even as textile exports to the US moderated under the tariff regime.

On the trade diplomacy front, both governments have been in talks to manage and refine this new landscape. By late 2025, Washington and Hanoi agreed on a framework trade deal that would keep most tariffs on Vietnamese textiles and garment imports to the US at the 20 per cent level, while also considering selective reductions on specific product categories.

This framework reflects a broader effort to stabilise bilateral trade relations, address non-tariff barriers and maintain market access for key export sectors such as textiles and garments.

Cotton Imports
Assuming fewer shocks are in store during 2026, Vietnam must now look to address one of its major vulnerabilities: its reliance on imported fibres, yarns, fabrics and raw materials.

Vietnam does not produce cotton commercially at scale, and as a result the industry imports 100 per cent of the cotton it uses, a dependence that has persisted for decades. Without domestic cotton fields, Vietnam must source this fibre entirely overseas, primarily from the US, Brazil and Australia.

Over the recent seasons, Australia and Brazil started to overtake the US as Vietnam’s largest suppliers of cotton as a result of competitive pricing and abundant availability.

In the first five months of 2025, however, even before the full force of US tariffs on Vietnamese finished goods kicked in, Vietnam’s cotton imports from the US surged sharply. Total Vietnamese cotton imports reached 455,000 tons, worth about $800 million, marking a 116 per cent increase in volume and a 79 per cent increase in value year-on-year. US cotton accounted for about 48 per cent of Vietnam’s total cotton imports in this period and made Vietnam the third-largest importer of US cotton after China and Pakistan.

Vietnamese textile industry leaders have subsequently taken steps to deepen commercial ties with US cotton producers. In mid-2025 a special trade mission was organised, with about fourteen executives from Vietnamese textile mills touring the US Cotton Belt. The delegates announced the purchase an estimated 400,000 bales of US cotton as a result of contacts made during the mission.

Supply Chain Ripples
Vietnam’s reliance on imported cotton, however, ripples through its supply chain. The country’s upstream textile segment (i.e., spinning fibres into yarn and weaving or knitting yarns into fabric) is still underdeveloped relative to its garment manufacturing segment. Only an estimated six per cent of Vietnamese factories produce yarn and 17 per cent make fabric, with the majority focused on garment assembly.

Imported fibres extend beyond cotton into synthetic materials as well, with 95 per cent of synthetic fibres such as polyester and nylon also brought in from international suppliers, mostly in East Asia. Chemicals, dyes and even support items like trims are similarly imported, making the industry’s integration with global supply chains both a strength and a structural risk.

This dependency shows up starkly in trade data. In 2025, Vietnam’s total import turnover of textile and garment raw materials in the first half of the year exceeded $12 billion.

China remains the dominant source for imported fabrics, yarns and components, with Vietnamese customs data indicating billions of dollars’ worth of textile inputs arriving from China annually.

Consequences
Without a well-developed upstream base, Vietnamese textile manufacturers have little choice but to pay global market prices for these essentials or to pass the costs down the value chain.

This has several strategic consequences. Firstly, it exposes Vietnamese producers to foreign exchange volatility and freight cost fluctuations, which can rapidly erode margins when global commodity prices spike. Secondly, it complicates compliance with rules of origin for preferential trade agreements, which often require a certain percentage of domestic inputs to qualify for tariff breaks.

This has become especially salient against a backdrop of tightening rules aimed at preventing trans-shipment, i.e., routing goods through countries with cheaper origin costs to exploit free trade agreements.

Recognising these vulnerabilities, industry leaders and policymakers have increasingly called for investment in upstream capabilities, from textile fibre production to weaving and knitting facilities, and for policies that encourage greater domestic sourcing and traceability.

Vinatex
Central to progress is Vinatex, the Vietnam National Textile and Garment Group, which is widely recognised as the central industrial champion of the country’s textile sector.

Established in 1995 and later publicly listed, Vinatex has driven integration across the textile value chain and remains one of the largest industrial groups in Vietnam. Through its network of more than 50 member companies and numerous affiliates, it contributes a significant share of national textile output and retains a strong presence in both domestic and export markets.

Estimates suggest the group accounts for upwards of a third of Vietnam’s production capacity in yarn and fabric and plays a major role in export turnover for the industry as a whole.

Beyond sheer scale, the importance of Vinatex lies in its strategic coordination and supply-chain integration. In recent years it has invested in initiatives designed to establish a more ‘closed-loop’ domestic supply chain, connecting yarn production with weaving, dyeing and garment finishing to reduce reliance on imported inputs and improve fulfilment of rules-of-origin requirements under free-trade agreements.

PD&B
The Vinatex Production, Design & Business (PD&B) Centre, opened in July 2024 in Hanoi, exemplifies this focus, acting as a hub to synchronise product development, quality control and research into locally sourced fabrics. Such efforts aim to boost internal resilience, drive consistent quality across production stages and enhance value capture within Vietnam’s textile ecosystem.

Vinatex also embodies the institutional maturity of Vietnam’s textile industry. It participates in training, design, market development and brand elevation, and plays an advisory role in national policy discussions on technology adoption, sustainability and international integration, underpinning the sector’s evolution from low-cost assembly towards higher value-added exports.

“Despite fluctuations in the global market, tariff pressures and rising input costs, Vietnam’s textile and garment industry maintained growth in 2025,” said Vinatex general director Cao Huu Hieu during a press conference in December. “Vietnam’s textile and garment export turnover in 2025 is estimated at around $46 billion in 2025, an increase of about 5 per cent compared to 2024."

Recycling Opportunities
With limited domestic fibre production, Vietnam can, however, respond positively to the growing global demand for more recycled fibres, and indeed, is already doing so.

In early 2025, for example, Recover, the Madrid, Spain-headquartered producer of recycled cotton fibre and cotton fibre blends, opened a new manufacturing facility in Vietnam, with the first Spring/Summer 2026 denim collection produced by local company Dawn Fabrics unveiled in September.

Situated in the Dong Nai province, the new Recover factory is close to both textile waste sorting and manufacturing operations, reducing the costs and footprint tied to shipping. It can provide brands in all major textile production markets with timely and efficient access to its materials.

Spanning nearly 14,000 square metres, the factory features Recover’s highly optimised recycling technology and has two state-of-the-art recycling lines, providing an annual production capacity of 10,000 tons.

RMix, Recover’s recycling solution for cotton-polyester blends, is further said to eliminate the need to separate fibres, overcoming a long-standing industry challenge in polycotton recycling and offering a significant sustainable advantage in terms of energy efficiency.

Circularity Shift
“Our expansion into Vietnam is a crucial step,” said Recover CEO Anders Sjöblom. “Circularity is currently underutilised in the Vietnamese textiles industry and by bringing our advanced technology to a key textile hub, we are not only enhancing how we serve our customers by expanding our global manufacturing footprint but also creating a positive shift towards circularity in Vietnam.”

Recover, a fourth-generation, family-owned company with a 75-year history in the textile industry, first expanded its operations outside Spain with a second manufacturing facility in Bangladesh in 2022.

Syre investment
On the recycled polyester front, and on an even bigger scale, in June 2025, Syre, the joint venture between leading retail brand H&M and tech investment firm Vargas, outlined details of its plans to construct a $1 billion polyester fabric recycling plant in the central Vietnam province of Binh Dinh.

The project, designed to have a capacity of up to 250,000 tons per year, is expected to become operational by the end of 2028.

Headquartered in Stockholm, Sweden, H&M now partners with 103 local factories that employ over 86,800 workers in Vietnam, and has also established 13 stores in the country since 2017.

Syre, headquartered in Mebane, North Carolina, has subsequently secured a multi-year agreement with Nike that will see the step-by-step integration of circular polyester from the Vietnam plant into the sports brand’s core performance lines.

“Our partnership with Syre represents a shift in our materials strategy and how we source,” said Sitora Muzafarova, Nike’s materials supply chain VP. “Textile-to-textile recycled polyester is essential in our ambition to design and produce breakthrough products that both perform to the highest standards and are more sustainable at the same time.”

“Having Nike, the global leader in sportswear and innovation, commit to textile-to-textile generated polyester sends a powerful signal to the entire industry,” said Syre CEO Dennis Nobelius. “This is not a one-off initiative or capsule collection but is a moment when circular materials move from concept to commercial reality at scale and wider adoption.”

As of September 2025, Vietnam is currently Nike’s largest global supplier, with 171 factories employing more than 480,000 workers.