Vietnam's Textile And Garment Industry: Seizing The "Golden Time" To Adapt To New US Taxes

The 10% tax rate, applied for 90 days, is considered a “golden time” for Vietnam’s textile and garment industry to boost production and export goods to the US market. However, external pressures from the new tax policy are also creating a necessary “impetus” for textile and garment businesses to leave their comfort zones and move towards smarter, more sustainable production, and become more proactive in the global value chain.

Diversifying Textile And Garment Export Markets

According to Mr. Truong Van Cam – General Secretary of the Vietnam Textile and Apparel Association (Vitas), the textile and garment industry is significantly affected by the US reciprocal tax. In 2024, Vietnam’s textile and garment exports reached 43.6 billion USD, of which 16.6 billion USD were exported to the US, accounting for 15% of the total US textile and garment imports and ranking second after China.  

Regarding the import of raw materials and accessories for the Textile and Garment industry, Vietnam currently imports 24.8 billion USD each year, mainly from China (62%). Therefore, when trade tensions between the US and China occur, Vietnam’s textile and garment industry will be greatly affected, as these are the largest export and import markets.

“The US imposing taxes will cause many difficulties for enterprises, the most concerning of which is foreign investment. Currently, up to 60% of Vietnam’s textile and garment export value comes from foreign-invested enterprises. Among the 50 largest enterprises exporting to the US, over 30 are foreign-invested. This means if we cannot negotiate an appropriate tax rate, it will be very difficult because these enterprises will limit, scale down production, or withdraw from the Vietnamese market,” Mr. Cam informed.

Meanwhile, Mr. Dinh Trinh Dung – General Director of May II Hai Duong Joint Stock Company, said that the company has signed orders, ensuring jobs until the end of August 2025. The US is one of the company’s traditional markets, accounting for about 30%.

The US applying a 46% reciprocal tax on goods originating from Vietnam would cause impacts on businesses. However, the US government’s decision to postpone the reciprocal tax for 90 days and reduce the rate to 10% is also an opportunity for businesses to proactively reorganize their operations, ready to respond to the new situation.

To avoid serious impacts from the US tariff policy, many enterprises have flexibly shifted towards seeking new export markets such as South Korea, the EU market, Northeast Asia…

“In the short term, we are actively increasing exports to remaining markets such as South Korea, Japan, Germany… to minimize the impacts of the US reciprocal tax. In the long term, May II Hai Duong will expand markets, approach new markets to maintain a stable export proportion of goods. However, market transition also takes 2-3 years. Currently, the company is moving towards the European market, challenging itself with difficult orders,” Mr. Dung shared.

Mastering Production Capacity, Technology, And Markets

The tax increase is not merely a cost problem but also a warning signal about the sustainability of Vietnam’s textile and garment export market structure. High dependence on a few key markets makes enterprises vulnerable to geopolitical fluctuations and external policy changes. Therefore, besides restructuring the apparatus towards lean operations and promoting the application of technology, especially Artificial Intelligence (AI) in management and production processes, enterprises can also shift their model from “Cut-Make-Trim” (CMT) to “Design-Own Brand” (ODM/OBM) to gain a better negotiating position when entering new markets.

According to the Vietnam Textile and Apparel Association, the 90-day period with a 10% tax rate is considered a “golden time” for enterprises to boost production and exports. Besides, businesses must ensure the best conditions for workers to increase efficiency, have reserve resources to compensate for potential order reductions later.

Currently, the volume of garment orders is being maintained, and businesses are also focusing their efforts on production at the highest speed to realize the full-year results as soon as possible. After this period, a new tax and price level may form, at which point businesses must accept this fluctuation.

The US is a key export market for Vietnam’s textile and garment industry, so the goal must be to maintain its position, not just for profit and revenue but also for the standing of Vietnam’s textile and garment industry in the US market. Because this is a leading market, once a foothold is established and market share is expanded, the position of Vietnam’s textile and garment industry in the global supply chain will inevitably be enhanced and attract the attention of large customers.

According to Mr. Le Tien Truong – Chairman of the Board of Directors of Vietnam National Textile and Garment Group (Vinatex), immediately in this second quarter, the entire textile and garment system is quickly executing existing orders by arranging production with increased overtime hours according to regulations, implementing solutions to increase productivity to maximize Q2 profits, creating reserves for the unpredictable second half of the year.  

Units need to fully utilize the short-term opportunity within 90 days to have sufficient resources to be resolute with long-term goals. Successfully completing orders during this period will clearly demonstrate the capacity for breakthrough, responsibility, as well as strong commitments to customers, building the reputation and competitive advantage of Vietnam’s textile and garment industry in the coming period.

“Besides the production campaign, the Group also directed related departments to research the supply chain of raw materials and accessories, prioritizing the use of fabric sources from enterprises within the system if they meet quality requirements, supporting enterprises in classifying each item and market at risk of being affected by new tax policies to have a basis for negotiation with customers and finding suitable directions.

The Group also focuses on requiring transparency in rules of origin as well as compliance with regulations on anti-trade fraud. At the same time, it guides Vietnam textile and garment industry enterprises to diversify products, supply chains, markets, and customers to avoid dependence on a few existing markets,” Mr. Truong affirmed.