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Vietnam¡¯s Textile Boom & Bust: A Tariff-Induced Rollercoaster

June 27, 2025 ¨C Vietnam¡¯s textile industry is caught in a perfect storm: after a 300% profit surge in early 2025, factories now face vanishing US orders as buyers freeze shipments ahead of potential tariff hikes.

1. The Short-Lived Boom

• Profit Surge (200-300%): Factories like Th¨¤nh C?ng and S?ng H?ng compressed production cycles to ship before July 5, capitalizing on the 90-day US tariff buffer.

• Vinatex Revenue Up 8%: Vietnam¡¯s state-owned textile giant reported 9 trillion VND ($360M) H1 revenue, but warns of a Q3 slowdown.

• "Just Enough" Orders: Factories now avoid long-term commitments, splitting production into small batches to hedge against tariff uncertainty.

2. The Looming Bust: US Orders Freeze

• August Bookings Down Sharply: H¨°a Th? Textile reports US orders paused as buyers reassess tariffs, inventory, and sourcing alternatives.

• Shifting Orders: Some buyers move to Bangladesh or China, while others demand price cuts (15-20%) .

• Worst-Case Scenario: If US tariffs exceed 20%, 70% of Vietnam¡¯s textile exports could vanish, forcing factory closures .

3. Structural Weaknesses Exposed

• Overdependence on China: 61.9% of fabrics are imported from China, leaving Vietnam vulnerable to "origin rule" risks.

• Labor Cost Pressures: At $300/month, wages now exceed Bangladesh ($95) and India ($145), eroding competitiveness.

• Retailer Hesitation: Brands like Gap, Walmart delay orders, fearing post-tariff cost spikes.

4. Survival Strategies: Diversify or Collapse?

? Pivot to Europe/Japan: Some firms (e.g., VSC) now fill 80% capacity with EU/UK orders .
? Localize Supply Chains: Reducing reliance on Chinese fabrics to avoid origin rule pitfalls.
? Lobby for Tariff Relief: Vietnam¡¯s govt seeks US trade concessions before the October deadline.

What¡¯s Next?

Q3 Uncertainty: If US tariffs stay ¡Ü20%, recovery possible; if >20%, mass relocations to Bangladesh/India likely.
Long-Term Risk: Vietnam¡¯s "fast fashion" model is unsustainable without higher-value production.

"This isn¡¯t a slowdown¡ªit¡¯s a reckoning." ¡ª Vinatex Chairman L¨º Ti?n Tr??ng.

Actionable Insight:

• Buyers: Lock in Vietnam orders now before potential October tariff surge.

• Suppliers: Diversify markets (EU/Japan) and reduce China fabric dependence.