Must Read Research
Also featuring commentary from Global Economic Weekly
June 1, 2025
Candace Browning, Head of BofA Global Research
The best way to predict the future? Understand the forces reshaping it. Canvassing analysts from around the globe, we find a safe harbor amid the choppy waters of reshoring and friendshoring. We explore the AI dictionary, a tool for steering through a sea of new terms, and discover the transformative potential of AI in disease diagnostics. We finish with beverages, a steady growth industry with sub-segments making impressive headway.
Reshoring has created 1 million U.S. jobs in the last 5 years, but job creation from these shifts peaked in 2022.
To better understand whether tariffs might drive a reacceleration, Head of Global Economics Claudio Irigoyen and the Economics team surveyed 56 BofA Global Research analysts from around the globe. Responses suggest that friendshoring/nearshoring is more likely, although our analysts do expect reshoring activity in capital intensive and national security-related sectors. Half of analysts point to Vietnam, Mexico, India and Thailand as likely destinations for Chinese production versus just 7% for the U.S. We point to Mexico as a particular beneficiary given low labor costs and favorable tariff treatment. Availability of qualified U.S. labor was cited by 68% of industrials/manufacturing analysts as a significant consideration and cost is another major issue. This week’s decision by the Court of International Trade reinforces another of our findings—reshoring takes time, tariffs are reversible, and this makes companies less inclined to commit.
With 78% of companies leveraging a rapidly evolving AI, keeping up with advancements can be challenging.
Head of Thematic Research Haim Israel published a pocketbook AI dictionary which is a useful resource, defining 30 key terms and helps us to navigate the landscape. Curious about generative AI or how Agentic AI functions? This dictionary clarifies these and more. With $2.5 trillion announced year-to-date for AI development, and inference costs dropping 280x in just 1.5 years, innovation is accelerating. For example, AI completed a decade’s research on antimicrobial resistance in just 48 hours. With an estimated $16 trillion in annual economic value at stake, understanding AI is geopolitically vital. Fun fact: when OpenAI launched ChatGPT in November 2022, it gained a million users in just 5 days – now that number could be achieved in an hour. By 2037, we might even see Artificial Superintelligence (ASI), which could be 10,000 times smarter than humans.
U.S. SMID Biotech Analyst Alec Stranahan published a note on AI’s transformative impact on disease diagnosis.
He offers a look at one industry that could be transformed by AI, with helpful results. The current diagnostic process often resembles a maze, requiring patients to visit multiple healthcare specialists. AI’s role in diagnostics is promising, with potential to reduce scan and analysis time by ~70%. AI models have shown remarkable effectiveness, detecting pneumonia in chest X-rays with 96% sensitivity and 64% specificity (compared to radiologists' 50% and 73%, respectively), and achieving 98.5% accuracy in predicting heart disease. AI also enhances patient monitoring and treatment selection; for instance, a groundbreaking algorithm predicted 175 cancer patients’ responses to chemotherapy with over 80% accuracy based on their gene expression profiles.
The focus on profits over volumes has been a long-running theme for the beverage industry.
Overall units have been flat for five years although retail dollars have grown 6% annually. Still, there are areas of volume growth, ranging from energy drinks to sports nutrition to probiotics, led by consumer interest in functional refreshment. Senior U.S. Food and Beverage analysts Bryan Spillane and Pete Galbo see energy drink volumes continuing to outpace soft drinks as a broader swath of consumers looks for higher caffeine content and zero sugar formulations. And while caffeine consumption is growing, traditional sources have been challenged. U.S. hot coffee volume has been flat-to-down while ready-to-drink coffee (RTD), cold coffee and energy drinks have been expanding.
Claudio Irigoyen, Head of Global Economics, BofA Global Research
The latest court ruling blocking most of President Trump's tariffs and the subsequent stay reinforce our point that uncertainty and confusion compound to increase the option value of waiting for economic agents' long-term decisions. With the stay, we are back to square one, as another round of import frontloading will presumably not happen beyond what was already expected after the China de-escalation. As a result, we continue to expect payback from 1Q GDP (gross domestic product) in the data in subsequent quarters given the case of missing imports. That should contribute to the soft patch in final demand that we are forecasting in 2Q-3Q. Meanwhile, the stay order also means the inflationary impact of tariffs remains in the pipeline. And with the market increasingly focused on U.S. fiscal risks, bond vigilantes could return any time.
May jobs hold the line despite payback
Payrolls are likely to rise by a stable 150k after coming in at 177k in April. This is slightly higher than consensus expectations of 130k. Claims in the survey week remained at muted levels. Firms likely paused the hiring of trade & transportation workers after the front-loading driven increase in the previous months. But given elevated uncertainty about the steady state on tariff policy, we don't think they would have already started shedding workers. Risks are to the downside. We expect the unemployment rate to remain at 4.2%.
