9 ‘Back to the US’ Stocks to Buy as Reshoring Takes Place: Bank of America

The 2000s were the golden age of globalization. The idea of interconnectedness across borders promised to lower consumer prices and increase economic growth by allowing each country to specialize in what it did best.

But the economic part of the equation has suffered a bit recently as free trade has faced increasing challenges.

In 2018, the Trump administration’s tariffs sparked a trade war with China. By 2019, a 21% tariff on Chinese imports. China responded with a 21.8% tariff on U.S. goods.

Then came the pandemic, which shut down the global economy and had a domino effect of supply chain problems. The shutdown highlighted countries’ dependence on each other for trade. China’s decision to shut down its manufacturing sector for an extended period, for example, worsened inflation in the US.

This year, rising geopolitical tensions in the Middle East have caused friction in Red Sea shipping lanes.

This progression explains why protectionist policies are becoming more common around the world. A July report by Société Générale, authored by Manish Kabra, head of U.S. capital strategy, referred to the global trend of reshoring, which is bringing outsourced production back to domestic borders as part of a changing world order. He said it’s happening for a number of reasons, including mitigating geopolitical risks, implementing climate initiatives and securing supply chains.

Kabra added that moving production abroad is part of a multi-strategic initiative that includes nearshoring, i.e. trade with countries that are closer, and friendshoring, i.e. trade with allies.

He believes the growth in the U.S. trade deficit over the past year will likely make it a key issue for both political parties. The U.S. trade deficit rose $5.8 billion in July from the previous month to $78.8 billion, according to the U.S. Bureau of Economic Analysis. That marks the largest deficit gap since June 2022.

While the Trump administration has traditionally been associated with trade wars and more protectionist measures, the Biden administration has kept China’s tariffs in place. It has even announced an additional $18 billion in tariffs on Chinese goods like semiconductors and electric vehicles, according to the Tax Foundation.

And yes, the U.S. reshoring initiatives may be bad for some parts of the economy, but they have many positive effects on others. They will create more manufacturing jobs and increase demand for domestic companies in the logistics and supply chain process.

A Sept. 19 research note from Bank of America suggests the shift is expected to benefit domestic small- and mid-cap stocks the most. It says early adopters have started to see an increase in demand so far, and others are expecting tailwinds in the next few years.

The note, authored by Jill Carey Hall, a specialist in equity and quantitative strategies, added that spending on manufacturing plant construction has increased by 19% over the past year as of June.

Below are nine stocks with a “buy” rating from sectors including industrials, REITs, steel companies, semiconductors, IT equipment and healthcare where Bof A expects demand for products and services to grow.