TIME TO MOVE MANUFACTURING TO VIETNAM

With the looming US-China trade war, is it finally time to move the manufacturing of backpacks and outerwear to Vietnam?

Update (2025.04.15):

Since we originally posted this blog entry, the manufacturing industries worldwide have been thrown into turmoil by new tariffs imposed by the United States on most countries. This situation is still developing, but we, here at Kowide Outdoors, believe it is important to remain transparent and honest in the information we publish.

The latest update in the ongoing tariff saga reveals that China is now facing total tariffs of 145%. Meanwhile, as of April 2, 2025, Vietnam has been subjected to a 46% tariff on exported goods related to our backpacks and other bags for travel, sports, and similar activities, with outer surfaces made of textile materials or man-made fibers, as well as woven fabric outerwear production.

The good news is that the USA has suspended the tariffs on Vietnam for 90 days while the Vietnamese and US governments work to negotiate a new trade deal.

For weeks, Vietnam has been offering incentives in hopes of persuading the U.S. administration to adopt a more favorable perspective on its significant trade surplus with America. Although the tariff has been suspended for 90 days, the two countries have initiated discussions following a meeting between a Vietnamese deputy prime minister and the U.S. Trade Representative. Export-driven Vietnam aims to reduce the duties to between 22% and 28%, if not lower, according to the latest news.

We will do our best to update this blog as this situation develops.

US and China trade relations explained

For nearly a decade now, trade tensions between the United States and China have escalated significantly, starting in 2018, primarily due to concerns over trade imbalances, intellectual property theft, and market access restrictions. Over the years, the US administration has imposed a series of tariffs on Chinese imports, hoping to utilize these as leverage to try to negotiate better trade agreements between the two countries.

Backpacks and other bags used for travel, sports, and similar activities, with outer surfaces of textile materials or man-made fibers, which fall under the Harmonized Tariff Schedule of the United States (HTSUS) are subject to a series of import duties. These are comprised out of the original duty of 17.6%, an additional 25% imposed in 2019, specifically on Chinese imports, and the most recent additional of 10% (which the president of the USA has now indicated will increasing by another 10%, per the latest news in early March 2025), which was just added in February 2025.  Note that these tariffs, or duties, are levied ad valorem on the value of imported products, including freight and insurance. 

There is no denying that this has and will continue to have a massive impact on brands that import goods under the HTSUS duties and that are still manufacturing in China. These tariffs will further fuel the trend for manufacturing to move out of China. Already, over the last half dozen years, factors such as rising labor costs within China, the ongoing trade tensions with other countries, concerns about supply chain disruptions, and a desire to diversify production across different regions have driven brands to move their manufacturing to other Southeast Asian countries like Vietnam, Thailand, and Indonesia.

Benefits of manufacturing in Vietnam

Manufacturing in Vietnam, instead of China, has become an increasingly attractive option for brands, offering them strategic advantages versus keeping their manufacturing in China. Here’s a detailed breakdown of reasons why Vietnam has become such an attractive manufacturing destination:

1. Cost Efficiency

• Lower Labor Costs: Vietnam generally has lower labor costs compared to China. This cost advantage can lead to substantial savings in production expenses, especially for labor-intensive products.

• Competitive Production Costs: The overall cost of doing business in Vietnam, including utilities, land leases, and logistics, tends to be lower than in China, making it an economically viable alternative for manufacturers.

2. Tariffs

• Tariffs: Brands can avoid the tariffs imposed on Chinese-manufactured goods entering the U.S. market by relocating their production to Vietnam. As illustrated at the beginning of this article, this ongoing and renewed tension between China and the USA has become quite a significant cost factor. A brand that shifts production from China to Vietnam could save well over 45% or more on tariffs, directly impacting profitability.

• Trade Agreements: Vietnam has various trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement, which can further reduce tariffs on goods exported to these regions.

3. Diversification of Supply Chain

• Risk Mitigation: Relying heavily on China for manufacturing poses risks, including geopolitical tensions, potential trade wars (and existing ones), and supply chain disruptions (as experienced during COVID-19, when China experienced major production disruptions). Manufacturing in Vietnam allows brands to diversify their supply chains and mitigate these risks.

• Geographical Proximity: Vietnam's location in Southeast Asia facilitates more straightforward access to other regional markets, making it a strategic hub for companies looking to expand their reach in Asia. This applies not only to exporting from Vietnam but also importing resources, which are produced in many of the neighboring Southeast and Eastern Asian countries.

4. Government Incentives

• Supportive Policies: The Vietnamese government actively encourages foreign investment through tax incentives, reduced tariffs, and streamlined regulations. For instance, the Investment Law of 2020 offers several privileges to foreign investors in Vietnam, fostering a more conducive business environment.

• Industrial Zones: Vietnam has established numerous industrial parks designed explicitly for foreign manufacturers, equipped with necessary infrastructure, utilities, and services.

5. Skilled Workforce

• Growing Talent Pool: Vietnam has a young, dynamic workforce with a growing skilled labor base. The government has been investing heavily in vocational training and education, enhancing the talent available for manufacturing sectors.

• Experience in Exporting: Many manufacturers in Vietnam have extensive experience in exporting, particularly in textiles, electronics, and footwear, which can help brands ensure quality and efficiency in production.

6. Production Capabilities

• Specialization: Vietnam has been rapidly developing its manufacturing sector, particularly in textiles and apparel. Many factories specialize in producing high-quality bags and backpacks, which can lead to better craftsmanship and quality.

• Capacity and Scalability: While China has a well-established manufacturing infrastructure with high capacity, Vietnam is catching up and may offer more flexibility for smaller orders, which is ideal for startups or brands testing the market. Startup brands can initiate a production run of 500 backpacks, whereas larger factories in China may require minimum orders of 3,000 or more, making it easier for smaller brands to launch.

• Rapid Turnaround Times: Many manufacturers in Vietnam are focusing on efficiency and speed, allowing for quicker turnaround times from production to delivery.

• Emphasis on Modernization: Vietnamese manufacturers increasingly adopt modern technologies and practices to improve efficiency and product quality. This trend can benefit brands looking for innovative production capabilities.

5. Quality Manufacturing

• High-Quality Standards: Manufacturers in Vietnam strive to compete globally, implementing strict quality control measures and increasingly adopting international quality standards. Brands prioritizing high-quality materials and production will find Vietnam very attractive.

• Quality Control: Establishing quality control processes in Vietnam can be easier, as Vietnamese manufacturers are keen to build relationships with Western brands.

6. Ethical Manufacturing

• Improved Labor Practices: Vietnam has made strides in improving labor practices, although due diligence is essential. Ethical manufacturing can enhance your brand reputation, particularly among socially conscious consumers.

• Sustainability: Many Vietnamese manufacturers are adopting more sustainable practices, such as using eco-friendly materials and processes. This aligns with the growing consumer demand for environmentally friendly products, which can appeal to eco-friendly consumers. Brands that prioritize ethical manufacturing can market their products as responsibly sourced, appealing to socially conscious consumers.

7. Lead Times and Shipping

• Proximity to USA: Vietnam is relatively closer to the USA compared to some manufacturing hubs in China, potentially reducing shipping times and associated costs.

• Logistics: Vietnam has been investing in its logistics infrastructure, harbors, and transportation systems, which has improved shipping efficiencies.

8. Cultural and Political Stability

• Stable Environment: Vietnam's political climate is relatively stable compared to China's, where government policies can change rapidly. This stability leads to a more predictable operating environment for foreign businesses.

• Cultural Compatibility: Vietnam's cultural ties with Western markets and its ongoing integration into the global economy make it an appealing partner for brands looking to establish a long-term manufacturing presence.

9. Cultural Compatibility

• Cultural Compatibility: Understanding and navigating cultural differences can affect business partnerships. Vietnam’s business culture differs from that of China and has stronger ties to European cultures, which might facilitate negotiations and relationships for Western brands.

• Business Relationships: Vietnamese manufacturers often prioritize long-term partnerships, fostering collaborative relationships that can improve production outcomes.

8. Market Trends

• Global Supply Chain Shifts: Due to geopolitical concerns, many brands are diversifying their supply chains away from China, making Vietnam an attractive alternative.

• Consumer Preferences: As consumers become more aware of sourcing practices, choosing Vietnam can enhance your brand's image as responsible and innovative.

• Long-Term Strategy: Companies are considering long-term strategies to mitigate risks associated with tariffs, enhancing Vietnam’s appeal as a manufacturing hub for international brands.

DOWNSIDE OF DIVERSIFYING PRODUCTION LINES

It is only fair that we also point out some of the hurdles to be aware of when shifting manufacturing to Vietnam.

• Setup Costs: This can lead to initial setup costs and longer lead times as companies establish relationships with new manufacturers and suppliers.

• Setup Time: Brands must invest time and resources in vetting new manufacturers and suppliers to ensure they meet quality expectations.

• Communication: While English proficiency is generally lower in Vietnam than in China, many Vietnamese manufacturers are improving their communication skills, particularly in urban areas.

KOWIDE OUTDOOR ADVANTAGE

At Kowide Outdoors, we have taken care to prepare ourselves to minimize these risks.

Established in 1974, Heng Gin Enterprise, a Taiwanese company, is a leading OEM manufacturer with over 50 years of experience supplying products to world-renowned brands across Europe, Asia, Australia, and North America.

With our world-class production facility in Vietnam, Kowide Outdoors, situated within easy reach of Ho Chi Minh City, and strategically placed offices in Taipei, New York, Shen Zhen, and Ho Chi Minh, we are ideally suited to cover all your manufacturing needs, from R&D, sourcing, and prototyping to bulk production.

Our factory in Vietnam features backpacks, technical bags, and outdoor apparel departments capable of manufacturing the highest-quality products, from custom backpacks, automotive bags, camera bags, and other specialty bags to technical apparel, from waterproof ski jackets to snowmobile outerwear to insulated outerwear. Our international team, fluent in English, Chinese, German, French, and Japanese, can guide you through the onboarding process to product delivery.

Our long-term relationships with premium suppliers enable us to offer our clients a wide variety of innovative and technical fabrics and hardware, from Courdura and Dyneema to YKK, Duraflex, FidLock, Trimmers, and many other renowned vendors. We communicate constantly with our vendors and rigorously research the markets to stay current on all trends and innovations. This allows us to provide our clients with the best selections, recommendations, lead times, and costs available.

Our mission is to continuously strive to exceed our clients' expectations through our technical expertise, ethical management, and rigorous quality control, and take pride in our ability to help them succeed. Heng Gin and our manufacturing facility, Kowide Outdoors, are built on trust. Through open communication and accountability, we provide the highest level of transparency from start to finish, delivering unmatched customer service and products.

KEY TAKE AWAYS

The ongoing tariff war between the USA and China significantly impacts the manufacturing landscape for backpacks and outerwear apparel sold in the USA. Increased costs due to tariffs push brands to consider alternative manufacturing locations.

Manufacturing your backpacks and outerwear apparel in Vietnam, versus China, presents several potential advantages, particularly in terms of tariff avoidance, cost savings, quality control, and ethical considerations. By strategically shifting production to Vietnam, your company can not only reduce costs and risks associated with tariffs but also position itself for long-term growth in a dynamic global market.

Ultimately, the decision should align with your business strategy, target market, and brand values. Balancing all these factors will help you choose the best manufacturing option for your backpacks and outwear apparel.

Contact us at Kowide Outdoors and let us guide you through the process of moving your backpack and outdoor apparel manufacturing to our top-of-the-line facility in Vietnam.