Vietnam Surpasses China in U.S. Apparel Market as Trade Policies Shift

Economic

Summary:

Vietnam’s textile and garment sector has overtaken China in the U.S. market, driven by American tariff adjustments that incentivized faster sourcing from Vietnamese suppliers...

Market Performance

As of July 2025, Vietnam exported $9.5 billion in apparel to the United States, compared with China’s $7 billion, giving Vietnam a 20.7% market share versus China’s 15%. Including textiles, yarn, and other materials, Vietnam reached $10 billion, only slightly below China’s $11 billion. Year-over-year, Vietnam’s apparel exports to the U.S. grew 17%, while China’s fell 20%, signaling a clear shift in orders away from China.

The primary factor was the U.S. retaliatory tariff policy, effective April 1, 2025, which prompted American buyers to accelerate Vietnamese shipments before the new tax rates took effect. This surge in orders temporarily boosted Vietnam’s exports, although it caused inventory buildups in the U.S. that moderated growth in subsequent months.

Long-Term Challenges

Despite the short-term gains, Vietnam faces three structural challenges:

Green Transition: Only 20–25% of firms can meet sustainability requirements, including solar energy adoption and biomass fuel usage. Limited financial resources and managerial capacity constrain others.

Digitalization and Traceability: U.S. customs increasingly enforce rules on origin. Products fully manufactured in Vietnam enjoy ~20% tariffs, whereas goods routed through Vietnam from China could face 40% tariffs. Firms must invest in digital systems to verify supply chains.

Raw Material Independence: Vietnam relies heavily on imported yarn and fabrics from China. Without domestic raw material production, benefits from FTAs such as CPTPP and EVFTA may be lost, eroding tariff advantages.

Policy Recommendations

To sustain growth and cement its position in the U.S., Vietnam needs government support for domestic material production, preferential credit mechanisms for green and digital upgrades, and clear international frameworks distinguishing locally made products from transshipped goods. Enhancing value addition and production standards is critical for long-term competitiveness.

Vietnam’s textile industry has successfully capitalized on favorable trade policies to expand its U.S. market share. However, realizing lasting benefits will require strategic investments in sustainability, technology, and supply chain independence to maintain resilience against future global trade and tariff shifts.

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