A Fibre2Fashion Report
Vietnamese garment exports to the US now face a 12.5 per cent Section 301 tariff, while Bangladesh, Cambodia, Indonesia and Malaysia face 10 per cent and may use a duty-free textile quota.
The shift could widen Vietnam’s cost gap by about $5,000 per container for qualifying rivals. Brands are expected to watch USTR quota rules, Vietnam-US talks and September OTEXA data.
On July 24, 2026, the US imposed a two-part competitive setback on Vietnam’s apparel industry. Vietnamese garment exports became subject to a new 12.5 per cent Section 301 tariff linked to alleged forced-labour concerns, while Bangladesh, Cambodia, Indonesia and Malaysia face only a 10 per cent duty. More importantly, those four countries also gained access to a new duty-free textile quota tied to purchases of US cotton and man-made fibres.
For Vietnam the largest apparel supplier to the US market, with nearly $17 billion in Chapter 61 and 62 apparel exports in 2025.
The real cost advantage lies in the duty-free quota
At first glance, the tariff differential appears modest. On a $40,000 container of finished apparel, the additional 2.5 percentage points increase landed cost by roughly $1,000. The real competitive shift, however, comes from the new textile quota. If shipments from Bangladesh or Cambodia qualify for duty-free entry, their Section 301 duty falls to zero, widening Vietnam’s cost disadvantage to about $5,000 per container. In an industry where labour typically represents 18–25 per cent of the manufacturing cost of a basic garment, that difference can directly influence sourcing decisions. Vietnam also starts from a weaker cost position, with manufacturing expenses already higher than several regional competitors, leaving price-sensitive basics such as T-shirts, knit tops and entry-level bottoms most exposed to order diversion.
Tariff and quota position: Vietnam vs. peer suppliers
| Country | Sec 301 Tier | Textile Quota Access | Net Position vs Vietnam |
| Vietnam | 12.5% | Excluded | — |
| Bangladesh | 10.0% | Eligible (TRQ) | Up to −$5,000 / container |
| Cambodia | 10.0% | Eligible (TRQ) | Up to −$5,000 / container |
| Indonesia | 10.0% | Eligible (TRQ) | Up to −$5,000 / container |
| Malaysia | 10.0% | Eligible (TRQ) | Up to −$5,000 / container |
| China (reference) | 12.5% | Excluded | Same tier as Vietnam |
Source: USTR Section 301 Final Action FRN (July 24, 2026). TRQ = tariff-rate quota under the new textile mechanism, tied to US cotton/MMF purchases. Rules of origin pending publication.
Vietnam’s export base remains resilient
TexPro data indicate that US apparel imports from Vietnam remained resilient before the tariff took effect. Combined knit and woven apparel imports reached $6.47 billion during January–May 2026, up 1.4 per cent year on year, reflecting sourcing momentum established before the policy announcement.
Vietnam’s largest export categories remain higher-value woven and technical knit garments. Exports of HS 6204 (women’s woven suits and dresses) totalled $1.06 billion during the first five months of 2026. HS 6110 (jerseys and pullovers, largely synthetic) reached $749.9 million, while HS 6203 (men’s woven suits and trousers) accounted for $500.4 million.
These categories require sophisticated manufacturing capabilities, integrated man-made fibre supply chains and advanced garment construction. Competing suppliers, particularly Bangladesh, currently lack sufficient synthetic fibre spinning and fabric capacity to absorb substantial production volumes in the near term.
Strategic implications
Vietnam’s competitive disadvantage is significant but should not be viewed as permanent. The October 26, 2025 White House Joint Statement established a framework for a 20 per cent reciprocal tariff with a 0 per cent exemption for selected products listed under Annex III. However, the agreement has yet to be finalised, leaving room for further negotiations. VITAS chairman Vu Duc Giang reported that Vietnam’s textile and garment exports reached $46 billion in 2025, below the industry’s $48 billion target, while setting an ambitious $50 billion export objective for 2026. Achieving that goal will depend heavily on greater certainty over future US trade policy.
Brand exposure also limits the pace of sourcing shifts. According to its FY2025 annual report, Nike sources 31 per cent of its apparel and 51 per cent of its footwear from Vietnam. Under Armour and Ralph Lauren also maintain substantial manufacturing exposure in the country. Given these established supply chains, a rapid relocation of production is impractical. Most brands are therefore more likely to rely on a combination of temporary cost absorption, selective retail price increases and supplier contract renegotiations than attempt large-scale sourcing shifts.
Next-week outlook
Three developments will shape the near-term outlook. First, USTR’s rules of origin for the new textile quota, without which duty-free access and Vietnam’s estimated $5,000-per-container disadvantage remains theoretical. Second, updates from VITAS and Vietnam’s Ministry of Industry and Trade on US trade negotiations. Third, June–July OTEXA import data, due in September, alongside sourcing commentary from Nike, Gap and Ralph Lauren, for the first evidence of order diversion.
Strategic bottom line
Vietnam’s position as the US’ largest apparel supplier faces its strongest competitive challenge since sourcing began shifting away from China. While its strengths in technical apparel and complex woven garments remain difficult to replicate, basic apparel is increasingly vulnerable as regional rivals gain both a tariff advantage and potential duty-free quota access. For global brands, the prudent strategy is to diversify sourcing for commodity basics while retaining technical production in Vietnam and incorporating tariff-adjustment clauses into Q4 contracts to protect margins and strengthen supply-chain resilience.
