The textile and garment industry enters the fourth quarter with an uneven recovery in purchasing demand and order volumes. Exports continue to be affected by shifts in sourcing, exchange rates, and inventory replenishment. Meanwhile, geopolitical tensions, energy costs, and tariffs are simultaneously reshaping costs and competitiveness. The outlook for 2027 must be assessed against a backdrop of diminishing tariff advantages, persistently high input costs, and several short-term tailwinds that are unlikely to recur.
Geopolitics, macroeconomics conditions, and U.S. tariffs: A constantly changing market environment
The conflict in the Middle East continues to pose risks to energy transportation and trade. Although the global container index edged down in the week ending October 8, freight rates remain significantly higher than in the same period last year. Rates on routes from Shanghai to Los Angeles and New York rose by 250% and 220%, respectively. Meanwhile, major central banks, including the Federal Reserve (Fed), the European Central Bank (ECB), the Bank of Japan (BoJ), and the Bank of Korea (BoK), have raised interest rates, making consumer credit and inventory financing more expensive.
U.S. tariff policy is also creating new disadvantages for Vietnam. Effective July 24, 2026, an additional tariff layer under Section 301 targeting forced labor took effect, with Vietnam and China both subject to a 12.5% rate, higher than the 10% rate applied to Bangladesh, India, Indonesia, and Cambodia. Some competitors are also expected to benefit from tariff-rate quotas linked to the use of U.S. origin cotton and yarn, further intensifying competitive pressure.
Diverging demand across import markets
In the U.S, textile and garment imports totaled USD 66.3 billion in the first eight months of 2026, down 6.5%. Apparel imports alone fell by 7.42% in value and 8.98% in volume. In August, apparel import value edged up 0.46%, while import volume declined 6.26%, indicating that the increase in value was driven primarily by higher unit prices rather than a substantive recovery in demand. Vietnam remained the leading apparel supplier to the U.S. market, with exports worth USD 10.98 billion and a 22.4% market share.
In the EU, textile and garment imports fell 5.3% in the first seven months of the year. However, from March to July, Vietnam’s share of the EU apparel market increased from 4.7% to 5.1%, while China’s share rose sharply from 26.7% to 34.4%. Bangladesh and India both saw their market shares decline.
China stood out for its demand for textile raw materials: textile and garment imports increased by 23% in the first eight months of the year, with textile and yarn imports rising by 31%. This presents a notable opportunity for Vietnam’s Spinning sector. By contrast, despite rising apparel imports in Japan and South Korea, Vietnam’s textile and garment exports to these two markets declined by 5.3% and 4.2%, respectively. This shows that growth in a market does not automatically translate into additional orders for Vietnamese enterprises.
Vietnam leads export growth, driven by textiles and yarn
In the first nine months of the year, Vietnam’s textile and garment exports reached USD 37.3 billion, up 7.2% — the highest growth rate among major exporting countries. However, growth was concentrated primarily in textiles and yarn, with export value reaching USD 6.94 billion, up 38.3%. This segment contributed USD 1.92 billion, equivalent to 77% of the industry’s total export growth. Meanwhile, apparel exports reached USD 30.3 billion, an increase of just 2%.
Intensifying competition from China and other rivals
China’s textile and garment exports have rebounded noticeably, reaching approximately USD 202 billion in the first eight months of the year, up nearly 3%. In August alone, exports rose by 7.7%. Nevertheless, Vietnam continued to gain apparel market share in the U.S. and EU between March and August 2026. Bangladesh and Indonesia recorded export growth, while India saw a decline, particularly in apparel.
2027 Outlook: A slow recovery in demand amid rising costs and intensifying competition
Geopolitical tensions persist, while macroeconomics offer little support
The Russia–Ukraine conflict, tensions in the Middle East, and the risk of maritime disruptions continue to weigh on the economic outlook. The OECD forecasts global growth of 3.0% in 2027, down from 3.4% in 2025, while average Brent crude prices are projected to reach USD 84 per barrel. G20 inflation is forecast at 3.6% in 2027, higher than previously projected, while interest rates in major economies may remain elevated.
For the textile and garment industry, this means energy, transportation, and raw-material costs are unlikely to decline rapidly, while demand is expected to recover slowly. High financing costs increase the burden of financing inventories and receivables, putting pressure on cash flow and profit margins.
U.S. tariffs: Policy remains volatile, putting Vietnam at a disadvantage compared with many competitors
U.S. tariff policy continues to change in terms of its legal basis, tariff rates, and scope of application. Vietnam currently faces an additional 12.5% tariff related to forced labor on covered goods, 2.5 percentage points higher than the rates applied to Bangladesh, Cambodia, India, Indonesia, and Pakistan. This differential could force Vietnamese enterprises to lower their prices or face the risk of order reallocation.
The outlook for 2027 also depends on the outcome of two U.S. Section 301 investigations concerning intellectual property and excess manufacturing capacity. As the results and potential remedial measures remain uncertain, current tariff rates cannot yet be regarded as a stable basis for the entire year. Moreover, temporary tailwinds that supported performance in 2026 are unlikely to provide the same boost to orders in 2027.
China: renewed competitive pressure as momentum in yarn imports eases
The narrowing tariff gap between China and other sourcing countries has created conditions for Chinese apparel to regain market share in the U.S. and EU. Its advantages in supply chains, labor, and speed of response are strengthening China’s competitiveness, reducing the scope for Vietnam to benefit from the “China + 1” strategy.
In the raw-material segment, growth in China’s cotton yarn imports slowed from 57.6% in July to 38.8% in August. Vietnam remains the leading supplier in terms of both market share and cotton yarn prices in this market, but faces intensifying competition from India, Pakistan, and Uzbekistan. Meanwhile, the risk of excess capacity in China could spur low-priced exports, putting pressure on Vietnam’s Garment sector in export markets and weakening the momentum behind further growth in yarn orders.
Domestic market: Mounting cost pressures amid limited scope for corresponding price increases
Enterprises are expected to face simultaneous pressure from wages, interest rates, raw materials, and energy costs. A draft proposal to adjust regional minimum wages recommends an average increase of 7.8%, effective January 1, 2027, while labor demand from major investment projects could intensify competition for workers.
Average lending rates across banking groups stood at 8.4–10.7% per annum in August 2026, approximately 2 percentage points higher than in the same period a year earlier. This increases working capital costs and raises the bar for investment project returns. In addition, the benefits of lower raw-material prices in early 2026 will gradually diminish as enterprises replenish inventories at prevailing market prices. The Spinning, Weaving, and Dyeing sectors also remain sensitive to electricity prices, supply reliability, and the risk of heatwaves associated with El Niño.
