IMPACT OF THE U.S.–VIETNAM TRADE AGREEMENT ON TEXTILE AND GARMENT EXPORTS

The U.S.–Vietnam trade agreement, which took effect in 2025, is having a significant impact on the textile and garment sector, one of Vietnam’s key export industries.

Under the agreement, tariffs on Vietnamese exports to the U.S. are set at 20%, a substantial reduction from the initially proposed rate of 46%. This lower tariff provides a much-needed boost to Vietnamese textile and garment enterprises, helping them maintain competitiveness in the U.S. market, which accounted for around 16% of the sector’s total export turnover, equivalent to nearly USD 19 billion in 2024.

However, not all aspects are favorable. Products deemed to be “transshipped” will be subject to a higher tariff of up to 40%. This presents a major challenge for companies that still rely heavily on imported raw materials, especially fabrics from China, which make up as much as 60% of input materials in Vietnam’s textile industry.

Despite this, compared to regional peers such as Cambodia, where tariffs can reach 36%, Vietnam maintains a competitive edge with its lower tariff rates, ability to fulfill diverse orders, and the strong inflow of foreign direct investment (FDI).

One of the key highlights is that Vietnam’s textile sector is actively pushing for localization of its supply chain, aiming for a domestic raw material rate of 45–50% this year. This effort is expected to reduce dependency on imports and increase the value-added of final products.

At the same time, Vietnam faces intense competition from other countries like India, Bangladesh, and Thailand, which are expanding their capabilities to supply the U.S. market with increasingly diverse offerings.

Overall, the U.S.–Vietnam trade agreement, with its preferential tariff rates, has opened up significant opportunities for Vietnam’s textile and garment industry to enhance its global competitiveness. However, it also raises the strategic imperative to localize production and improve product quality in order to fully capitalize on these advantages.

This article compiles information from trusted industry sources including Ainvest, Fibre2Fashion, JD Supra, and Vietnam Briefing.