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Positive Signals Supporting Vietnam’s Textile and Garment Industry

  1. Global Economic Recovery
    • Major import markets such as the US, EU, and Japan are recovering, driving increased consumer demand, particularly for apparel products.[1]
    • Global GDP Growth Forecast for 2025:
      • OECD projects optimistic growth at 3.3%, followed by IMF at 3.2%. Morgan Stanley and Goldman Sachs forecast 3% and 2.7%, respectively. However, growth prospects vary significantly across regions.
      • Goldman Sachs predicts the US economy will grow faster than other developed countries for the third consecutive year, reaching 2.5%. OECD estimates US growth at 2.4%, while Europe is forecast at 1.3%, Japan at 1.5%, and China at 4.7%. Nevertheless, the US remains a key “variable.”

      • Inflation in OECD countries is expected to decline further, from 5.4% in 2024 to 3.8% in 2025, driven by tight monetary policies. In the US, inflation may rebound by late 2025 due to rising costs of goods and labor under new tariffs and immigration policies introduced by Trump. In the Eurozone and UK, inflation is expected to ease gradually.
    • Inventory levels in these markets have significantly decreased, leading to increased textile and garment import demand.
      • Traditional markets like the US and EU have depleted their inventories, prompting them to resume placing orders. However, growth is stable rather than explosive, as seen post-pandemic .
  2. Shift in Orders
    • Due to political and economic instability in countries like China, Bangladesh, and Myanmar, many orders have shifted to Vietnam, creating significant opportunities for Vietnamese businesses to boost exports.
      • Myanmar continues to face political and economic instability following the 2021 military coup. Its textile and garment industry has been severely impacted, with many factories closing or operating minimally. This has shifted orders to Vietnam, which offers a more stable production environment.
      • Bangladesh, the world’s third-largest textile exporter and a key competitor to Vietnam, has seen a 25%-40% reduction in orders, weakening its production capacity and customer confidence.
      • In China, economic tensions are rising as Donald Trump begins his second presidential term, pledging tariffs of up to 60%-70% on Chinese goods. Additionally, China’s manufacturing economy suffers from severe overcapacity.
  3. Positive Order Outlook
    • As of early 2025, many companies in the textile and garment sector have secured substantial orders until June 2025 , primarily for the US market, laying a solid foundation for achieving export targets this year.

Major Challenges in 2025

1. New US Tariff Policies

    • If President Donald Trump enforces new tariff policies, Vietnamese textile and garment exports to the US may face an additional 10% import tax, significantly impacting the industry as the US remains its largest market.
    • Bangladesh benefits from preferential tariffs as a least-developed country, making its goods more competitive in the international market. Bangladesh’s garment production is expected to stabilize by Q2 2025, intensifying competition with Vietnam.
  2. Order Volatility
    • In the second half of 2025, importers are likely to shift from long-term contracts to shorter, smaller orders.
    • The order shift from Bangladesh is expected to gradually decrease as the country stabilizes its production.
  3. Cost Pressures
    • Export order values are trending lower, while input costs, such as raw materials and labor, continue to rise. Vietnam’s labor costs are nearly three times higher than Bangladesh, creating significant price competition pressures.
    • “Green production” standards require businesses to invest more to meet carbon reduction, traceability, resource self-reliance, and labor compliance standards.
  4. Sustainability Requirements
    • Over the next 2-4 years, the textile and garment industry will face 35+ new laws from major markets such as the US, EU, Japan, China, and India, all focusing on sustainability.
    • Failure to meet these requirements could result in order losses and revenue declines.

Solutions for Vietnam’s Textile and Garment Industry

  • Market Expansion and Order Acquisition
    • Companies need to join international organizations and textile associations to strengthen connections, attract customers, and leverage available support.
    • Effectively utilize tariff incentives from free trade agreements (FTAs) to access new markets.
  • Enhancing Production Capacity
    • Train and develop workforce skills, and invest in new technology to improve product quality and meet international standards.
    • Focus on producing high-value-added products to enhance competitiveness.
  • Compliance with Green Standards
    • Prioritize sustainable development by investing in eco-friendly production systems, reducing carbon emissions, and ensuring traceability to meet the demands of major markets.