Part II
The global economy has never been more integrated - nor more fragile. Each policy shift, each interest-rate adjustment or tariff revision now reverberates across continents within weeks. The world functions like an immense, interlinked mechanism where a single correction in one region triggers an imbalance in another.
Professor Rudy Aernoudt calls this dynamic the economic domino effect. “Every decision made in Washington or Beijing affects your EBITDA in Vilnius or Amsterdam,” he notes. “Your company’s results depend not only on your market but on choices taken thousands of kilometres away.” Modern macroeconomics, in his view, resembles global physics: every force generates an equal and opposite reaction somewhere else.
Nowhere is this clearer than in trade policy. The recent escalation of U.S. tariffs has been one of the most expensive experiments in economic nationalism. Under the 2025 tariff regime, American corporate profits have plunged by nearly half - a staggering 47 percent, equivalent to $1.5 trillion a year, when total U.S. profits amount to $3.3 trillion. Tariff revenues did little to offset the damage. The costs were simply passed on to consumers, pushing prices up 1.7 percent and shaving roughly $2,800 a year from the average household budget. What began as protectionism ended as a self-inflicted inflation tax.
In China, the picture is inverted. Deflation in the business-to-business sector has reached around 3.7 percent annually. While deflation signals domestic weakness, it translates into a structural competitiveness gain abroad. Each year Chinese manufacturers become roughly 6 percent more price-competitive than their European peers, purely through the inflation-deflation gap. Add China’s technological overcapacity and its exclusion from U.S. markets, and Europe inevitably becomes its prime export outlet. “Even a Lithuanian SME with no direct ties to Asia will feel the ripple effects,” warns Aernoudt. “A competitor in Shenzhen can become your problem without ever selling a product in Europe.”
Russia presents a different paradox. Official statistics suggest stability; the underlying data say otherwise. Corporate loans have ballooned by 38 percent in three years, from 69.6 to 95.9 trillion roubles. Much of that credit is financing a war economy that generates little real revenue. Non-performing loans already exceed 8 percent. Bloomberg now sees a “credible risk of systemic banking crisis within the next 12 months.” Such a shock would not remain confined to Moscow - it would ripple through commodity markets, logistics corridors and energy prices across Europe.
Europe itself faces a slower, structural crisis. Over the past five years, the European Commission has adopted more than 13,000 new laws - five times the volume passed in the United States. This regulatory glut, Aernoudt argues, “chokes innovation and buries SMEs in bureaucracy.” Meanwhile, the continent’s investment gap has widened to €1.2 trillion a year — triple the cost of the post-war Marshall Plan. Mario Draghi’s 2024 report concluded bluntly that without at least €800–1,200 billion in additional annual investment, Europe cannot sustain its industrial base or its energy transition.
For the Baltic economies, this turbulence is not theoretical. Lithuania’s export-oriented industry is among the most globally exposed in the EU. Latvia’s ports feel the decline in Russian transit, while Estonia’s tech sector faces rising labour costs and Chinese deflationary pressure in software and hardware markets. “We are too small to be isolated,” Aernoudt observes, “yet integrated enough to be hit first by every global shock.”
Macroeconomic turbulence is no longer a passing storm; it is the climate itself. One decision at the U.S. Treasury, one currency adjustment in Beijing, one sanctions package in Brussels - and the waves meet in a Lithuanian company’s balance sheet. Such is the physics of the modern economy: everything is connected, and nothing stands apart.
Continue to Part III The Future of Business: From Excel to Foresight - How to Survive an Unpredictable World
