Amid heightened volatility in international trade, the Middle East crisis is exerting far-reaching impacts on global supply chains. For Vietnam’s textile and garment industry—one of the country’s key export sectors—these effects go beyond logistics disruptions, directly influencing production costs, sourcing strategies, and long-term competitiveness.
The Middle East – A Geopolitical Hotspot and the “New Normal” of Supply Chains
Since early 2026, escalating tensions in the Middle East have extended beyond the region, becoming a structural risk to global trade. As a result, supply chains are entering a “new normal” characterized by:
- Prolonged logistics disruptions
- Rising transportation and input costs
- Shifting global purchasing behavior
Vietnam’s textile and garment industry is facing multi-dimensional pressures from these developments.
Logistics Disruptions and Increasing Transportation Pressure
Extended shipping times
Disruptions in the Red Sea have forced many shipping routes to detour via the Cape of Good Hope, extending transit times by 14–20 days. This severely impacts fast fashion models, which depend heavily on speed.
Shortage of empty containers
Longer shipping cycles have led to container imbalances at major ports, creating challenges in:
- Transportation planning
- Meeting delivery schedules
- Optimizing logistics costs
Rising Raw Material and Energy Costs
Volatility in input prices
Vietnam relies on over 70% imported raw materials. When oil prices exceed USD 100 per barrel:
- Prices of synthetic fibers (polyester, nylon) surge
- Costs of dyes and finishing chemicals increase
- Domestic operating expenses rise
Higher domestic fuel prices
Rising fuel prices drive up:
- Manufacturing energy costs
- Inland transportation expenses
- Pressure on profit margins, especially for CMT (Cut-Make-Trim) businesses
Increasing Trade and Financial Risks
- Disruptions in international payments: Difficulties in confirming L/Cs due to banking risks and sanctions
- Order risks: Exports to the Middle East (~USD 200 million/year) may be delayed or canceled
- Exchange rate pressure: A stronger USD increases import costs
These factors expose exporters to higher levels of uncertainty in global transactions.
Shifts in Global Sourcing Strategies
The crisis is prompting international brands to adjust their strategies:
Reduced reliance on fast fashion
Longer delivery times are eroding Vietnam’s speed advantage.
Shift to “Just-in-Case” models
Brands now demand:
- Higher buffer inventories
- Greater production flexibility
Increased use of air freight
Urgent orders are shifting to air transport despite a 70–100% cost increase, resulting in:
- Prioritization of high-value products
- Reduced share of basic items
Global Trade Restructuring and Intensifying Competition
Nearshoring trends and U.S. tariff policies
U.S. import tariff adjustments push effective tariffs on Vietnamese goods to 22–28%. Meanwhile:
- Central American countries (e.g., Guatemala, El Salvador) enjoy 0% tariffs
- Mexico gains advantage from proximity and trade policies
Competition in the EU market
- Vietnam
- Advantages: EVFTA (0% tariffs), ESG compliance
- Challenges: reliance on imported materials, longer logistics
- India
- ~90% self-sufficiency in raw materials
- Shorter delivery times
- Bangladesh
- EBA benefits (duty-free EU access)
- Strength in cost-efficient green production
- China
- Integrated supply chain
- Advanced manufacturing capabilities
Consumer Trends and the Role of Technology
Retail prices have increased by 5–15% in the U.S. and EU. Consumers are increasingly prioritizing:
- Sustainable fashion
- High-quality products
At the same time, AI adoption and on-demand manufacturing help:
- Reduce costs by up to 20%
- Optimize inventory management
Adaptive Strategies for Vietnam’s Textile and Garment Enterprises
Adjusting trade terms
- Shift from CIF to FOB/FCA
- Share transportation risks with partners
Diversifying transportation
- Increase use of Asia–Europe rail routes
- Combine multimodal transport
- Use air freight for urgent orders
Restructuring materials and products
- Increase localization rates
- Prioritize natural and recycled materials
- Focus on high-value products
Risk management
- Renegotiate delivery timelines
- Purchase war risk insurance
- Leverage export financing tools
Long-Term Orientation: “Three-Pillar Diversification”
- Markets: CPTPP, ASEAN
- Products: High-tech, eco-friendly
- Customers: ESG-compliant partners
Green Transformation and Supply Chain Upgrading
Enterprises need to:
- Invest in vertically integrated supply chains (fiber – weaving – dyeing)
- Adopt AI and big data
- Utilize renewable energy
These are critical to enhancing sustainable competitiveness.
The Role of Policy and Industry Support
Regulatory bodies should:
- Provide timely market and logistics risk information
- Promote green finance initiatives
- Stabilize energy prices
Strong policy support will help businesses navigate this volatile period.
Conclusion
The Middle East crisis is reshaping global supply chains and placing Vietnam’s textile and garment industry under unprecedented pressure. However, it also presents opportunities to:
- Restructure production models
- Enhance product value
- Transition toward sustainable development
In the long term, adaptability and the right strategic direction will be key for Vietnam’s textile and garment industry to sustain growth and strengthen its position in the global market.