Vietnamese textile and garment firms brace for Middle East shock

Input costs and logistics expenses rose sharply after geopolitical shocks in the Middle East, while global demand recovered only slowly. Textile and garment firms in Vietnam are therefore operating in a squeeze between higher production and transport costs and weaker pricing power amid competition from large exporting markets.

Middle East shock lifts logistics and input costs

Mr. Tran Ngoc Liem, Director of the Vietnam Chamber of Commerce and Industry (VCCI) Ho Chi Minh City branch, said geopolitical volatility—especially the Middle East conflict—has pushed fuel prices higher, dragging freight costs up. Because the textile and garment sector relies heavily on imported materials and exports, the impact spreads quickly across the production chain, from inputs to delivery.

Mr. Pham Van Viet, Chairman of the Board of Directors of Viet Tien Jeans, said raw material prices increased by about 8-18%, while shipping rates rose by an additional 4,000-5,000 USD per container. These changes raise production costs, but firms face limited ability to pass higher costs to customers due to weak purchasing power.

Export concentration and unstable orders add pressure

To cope, many companies have adjusted operating strategies, including splitting orders, limiting air shipments, and seeking additional markets to diversify risk. However, many firms still depend heavily on key destinations: the US and the EU account for 55-60% of orders.

At the industry level, export dependence is more dispersed but remains high. According to customs data, Vietnam’s textile and garment exports in 2025 reached about $46 billion, up 5.6% year-on-year, helping Vietnam remain among the world’s top three textile exporters.

Vietnamese textiles and garments are sold in 138 markets, but the export structure is still concentrated. The US accounts for 38-40% of export value (more than $18-20 billion), followed by the EU (12-15%), Japan (around 10%), and Korea (nearly 9%). This concentration leaves the sector vulnerable to fluctuations in global demand.

Beyond costs, order stability is also weakening. With input prices fluctuating continuously, firms struggle to plan production and sign long-term contracts. Cautious sentiment has grown among both producers and global brands, slowing order finalization and shortening order cycles.

2026 outlook: slow demand growth and stronger regional competition

According to Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, in 2026 the industry will continue to face risks from prolonged geopolitical uncertainty, while input, production, and transport costs remain high.

On the demand side, global consumption is recovering slowly, increasing by only about 2-2.5% per year. This makes international brands and buyers more cautious, favoring smaller orders and shorter lead times rather than long-term contracts.

Competition is also intensifying as regional rivals expand their advantages. Mr. Cao Huu Hieu, General Director of Vietnam Textile and Garment Group, said the sector remains a major export contributor with large turnover, but faces clearer pressure from Bangladesh, India, and Indonesia.

Bangladesh continues to attract orders due to low labor costs and large production scale, especially in low-cost outsourcing segments. India is gaining with abundant domestic raw material supply and the ability to absorb orders when supply chains shift. Indonesia competes directly in the mid-range segment, supported by costs and more flexible support policies.

Sustainability requirements raise compliance costs

In parallel, sustainability requirements are becoming more stringent. From 2025, many major markets have applied higher standards on traceability and emissions, requiring additional investment in technology, energy, and management systems. At the same time, cost headroom is narrowing, making efficiency and cost optimization more difficult.

Industry response: efficiency, market diversification, and technology

Under mounting pressure, firms say they must adjust both short- and long-term strategies. In addition to tightening costs and optimizing operations, many companies are diversifying markets to reduce dependence on a limited set of regions.

Mr. Vu Duc Giang said the industry needs to improve adaptability through technology application, automation, and digital transformation to raise productivity and reduce costs. He added that green transformation is no longer optional; it is becoming a requirement to maintain international orders.

From a more positive perspective, Mr. Pham Xuan Hong, Chairman of the Vietnam Textile and Apparel Association (HCMC branch), said Vietnam’s stable economic foundation and a skilled labor force remain advantages that can help the sector sustain growth. Based on practical surveys, he expects textile and garment exports to rise by about 15% in 2026.

Mr. Hong also emphasized the importance of connecting supply chains and accessing technology. The SaigonTex – SaigonFabric event, scheduled for April 8-11 at SECC, is viewed as a channel for firms to find raw material and accessory sources, access new technologies, and expand partnerships. Industry seminars within the event are also expected to help companies update production trends and shape long-term strategies.

Targets and strategic priorities

Under the Vietnam Textile and Apparel Association’s direction, the sector will focus on three pillars: diversifying markets, customers, and products; developing domestic supply of raw materials and accessories; and accelerating automation and digital transformation. The export value target is 48-49 billion USD in 2026, with a goal of 64.5 billion USD by 2030.

In the medium term, the core task is to increase the localization rate of raw materials and accessories to reduce reliance on imports—an exposure factor when supply chains are disrupted. Companies also need to shift faster toward higher value-added orders that are less sensitive to price. In the long term, “greening” production and optimizing energy use are described as essential to reduce risks from oil price volatility and maintain competitiveness in global supply chains.