Vietnam faces a 12.5% additional duty while four regional competitors receive lower tariffs and access to a quota mechanism linked to US cotton and textile purchases.
Vietnam’s position as the largest apparel supplier to the United States is under pressure after Washington imposed a 12.5% Section 301 tariff on its goods—2.5 percentage points above the rate applied to several competing Asian sourcing markets.
The new duties took effect on July 24 and target 60 trading partners over alleged failures to impose or effectively enforce restrictions on goods produced with forced labour. Bangladesh, Cambodia, Indonesia and Malaysia face a lower 10% tariff after making trade or enforcement commitments recognised by Washington.
A double sourcing disadvantage
Vietnam overtook China in 2025 to become the largest apparel exporter to the US. Its manufacturing base is central to the supply chains of Nike, Gap, Ralph Lauren and Under Armour, among other international brands.
The tariff differential alone raises Vietnam’s landed-cost disadvantage. More importantly, Bangladesh, Cambodia, Indonesia and Malaysia are the only countries selected for a forthcoming textile tariff-rate quota mechanism.
Under the three-year scheme, specified textile and apparel volumes could enter free of the new Section 301 duty. Eligibility will be linked to each participating country’s purchases of US cotton and textile inputs. USTR is expected to establish the mechanism when operationally feasible, targeted by September 1, 2026. Until then, eligible goods from the four countries remain subject to the 10% rate.
Trade surplus complicates negotiations
Vietnam remains in trade negotiations with Washington and is excluded from the quota arrangement. Its leverage is constrained by a rapidly expanding bilateral imbalance: Vietnam recorded a $178 billion US trade surplus in 2025, while its exports to the US exceeded $20 billion in January 2026 alone, up 53% year on year.
For apparel brands, the immediate response may involve renewed cost negotiations, sourcing reallocation and closer assessment of duty exposure by product category. Vietnam retains substantial advantages in scale, technical capability and supplier infrastructure, making rapid relocation difficult.
The next commercial signal will be whether Hanoi secures a tariff reduction or access to the textile mechanism. Without comparable treatment, incremental US orders could shift towards competitors able to combine a lower base tariff with duty-free quota eligibility.
