Impact of US tariffs on Vietnam’s textile, clothing and footwear sector

Higher tariffs threatening a mainstay sector

The textile, clothing and footwear (TCF) sector plays a significant role in the economic growth of Vietnam, consistently ranking among the top industries for export revenue and labour demand. Last year, the combined export turnover of Vietnamese TCF products surpassed US$71 billion, a 10-11 percent year-on-year rise. Of that total, over a third was headed for the US, followed by other major markets such as Japan, the EU, Korea, China, and ASEAN.

Ms Corinna Joyce, Program Manager of the Bachelor of Fashion (Enterprise) at RMIT University Vietnam, remarks: “Competitive pricing, reliability, favourable government policies, flexibility, and timely delivery have significantly contributed toward the rapid growth of the TCF sector in Vietnam. Further, factors such as political instability in competing countries like Bangladesh and Myanmar, and high domestic demand in Vietnam, have benefitted the sector.”

The Vietnamese textile and clothing industry is targeting an export turnover of US$48 billion this year, while the footwear and leather sector has set a goal of US$29 billion. However, the recent adjustments in the US tariff rates have raised concerns.

Starting from 5 April 2025, all Vietnamese TCF products exported to the US have been levied an additional 10% tariff. This is creating imbalance in the trade dynamics of Vietnam as the average tariff has increased three times from 5% to 15%.

After 90 days, if the “reciprocal" tariffs are further increased by 46%, the new rate will exceed 51% (depending on the product type), which is a 10-fold increase from the current rate. What’s more, this will affect all industries in the TCF manufacturing sector, including apparel clothing, home furnishing, footwear, activewear, performance wear, and automotive textiles. 

Vietnam’s TCF sector excessively rely on foreign suppliers in China, Hong Kong and South Korea for raw materials such as fabrics and trims. For example, in 2023 the total import value of fabrics was US$13.2 billion, which is equal to more than 33% of the total export value. Further, Vietnam’s heavy reliance on only a few exports market (US being the number one) is vulnerable to tariff changes and geopolitical shifts.

Associate Professor Rajkishore Nayak from RMIT's Bachelor of Fashion (Enterprise) program highlights that despite Vietnam's involvement with 17 international free trade agreements (FTAs), there is no FTA with the US except the bilateral trade agreement. The tariff increase will thus dampen the price competitiveness of Vietnamese goods heading to the US market, making them less attractive compared to products from India and Bangladesh, which enjoy lower tariffs. However, Vietnam will have a competitive advantage over its neighbouring countries, Cambodia and Laos, with tariff rates of 49% and 48%, respectively.

“The escalation in tariffs will likely result in higher product prices and a decline in export volume, potentially contributing to inflation. It will disrupt the supply chain dynamics of Vietnamese TCF producers, and US-based brands importing from Vietnam will likely seek alternate suppliers from other countries,” the RMIT researcher says.

“In addition, the situation may create a cascading impact on various industries that depend on Vietnamese materials for value-added production, including in the US.”

Measures to tackle the problem

In response to the escalating threat of increased tariffs from the US, the Vietnamese TCF sector faces a critical juncture – one that requires immediate action as well as a mid-to-long-term shift to build higher resilience to external threats.

The tariff change indicates that the Vietnamese TCF sector should change towards self-reliance on raw materials, develop ethical production processes, invest in automation and AI, diversify product ranges, and look for alternate markets in Asia, Oceania, and the EU.

Associate Professor Nayak emphasises, “In order to lessen its reliance on the US market, the Vietnamese TCF sector should prioritise long-term strategic objectives that include diversification of export markets and products, investment in technology, green manufacturing, and a focus on sustainable product offerings.”

Industry associations from both the US and Vietnam are implementing short-term relief measures while laying out policies for the long run. Some have expressed commitment to increasing cooperation and support aimed at supply chain transparency and compliance with the US policies.

According to an association representing US cotton in Vietnam, their efforts are currently focused on supporting the textile and garment industry in understanding the advantages of US cotton through business networking events, technical services, and sustainability and traceability platforms.

“In light of current uncertainties surrounding reciprocal tariffs, we remain committed to providing trustworthy updates to our partners and US cotton users in Vietnam. We are assisting mills and manufacturers in utilising the US Cotton Trust Protocol to ensure supply chain transparency and compliance with evolving US government regulations. These initiatives aim to strengthen the resilience and sustainability of the industry,” says a representative of the association.

Meanwhile, the Vietnam Textile and Apparel Association (VITAS) reported early supply chain disruption when the tariffs were first announced. The 90-day delay in implementation offered relief and gave the industry time to adjust.

“Currently, brands, producers, and manufacturers are actively expediting shipments to maximise opportunities during this critical window. This period has also allowed stakeholders across the supply chain to strengthen coordination, optimise operations, and reinforce their commitment to timely delivery. The industry remains proactive, resilient, and focused on maintaining strong relationships with international partners while adapting to the evolving trade environment,” Ms Nguyen Thi Tuyet Mai, Deputy General Secretary of VITAS says.

Speaking with RMIT researchers, a representative of a Ho Chi Minh City-based exporter of textile and clothing to the US shared that they are actively coordinating with their buyers and partners to fully understand and align with the tariff policies. Their immediate priority is to expedite shipments on existing contracts before the 90-day implementation period ends. 

“At the same time, we’re accelerating investment in traceability and diversifying our market portfolio to reduce dependency on any single region and strengthen our global positioning,” the representative says.

Industry associations from both the US and Vietnam are implementing short-term relief measures while laying out policies for the long run. Some have expressed commitment to increasing cooperation and support aimed at supply chain transparency and compliance with the US policies.

According to an association representing US cotton in Vietnam, their efforts are currently focused on supporting the textile and garment industry in understanding the advantages of US cotton through business networking events, technical services, and sustainability and traceability platforms.

“In light of current uncertainties surrounding reciprocal tariffs, we remain committed to providing trustworthy updates to our partners and US cotton users in Vietnam. We are assisting mills and manufacturers in utilising the US Cotton Trust Protocol to ensure supply chain transparency and compliance with evolving US government regulations. These initiatives aim to strengthen the resilience and sustainability of the industry,” says a representative of the association.

Meanwhile, the Vietnam Textile and Apparel Association (VITAS) reported early supply chain disruption when the tariffs were first announced. The 90-day delay in implementation offered relief and gave the industry time to adjust.

“Currently, brands, producers, and manufacturers are actively expediting shipments to maximise opportunities during this critical window. This period has also allowed stakeholders across the supply chain to strengthen coordination, optimise operations, and reinforce their commitment to timely delivery. The industry remains proactive, resilient, and focused on maintaining strong relationships with international partners while adapting to the evolving trade environment,” Ms Nguyen Thi Tuyet Mai, Deputy General Secretary of VITAS says.

Speaking with RMIT researchers, a representative of a Ho Chi Minh City-based exporter of textile and clothing to the US shared that they are actively coordinating with their buyers and partners to fully understand and align with the tariff policies. Their immediate priority is to expedite shipments on existing contracts before the 90-day implementation period ends. 

“At the same time, we’re accelerating investment in traceability and diversifying our market portfolio to reduce dependency on any single region and strengthen our global positioning,” the representative says.

Story: Rajkishore Nayak, Corinna Joyce, Ngoc Hoang