Although the official result of the US election remains under dispute, with legal challenges from camp Trump in the offing, the outcome seems clear.
Barring successful legal challenges from the incumbent, Democratic Party candidate Joe Biden will be the 46th US president, replacing Republican President Donald Trump after just one four-year term.
Congress is likely to remain split, with the Democrats retaining the House of Representatives and the Republicans retaining the Senate.
Republicans will therefore still have considerable influence over any legislation that needs to pass through both houses of Congress.
With a split Congress, Biden and the Democrats will only partly be able enact their plans to dramatically expand the role of government.
On the domestic front, Biden will still be able to enact much of his regulatory and social agenda through the direct powers afforded to him as president.
Nevertheless, much of his spending and tax agenda will be pared back by a Republican-majority senate.
For instance, Biden’s ‘Green New Deal’, involving $2 trillion in spending over four years, will be blocked or scaled down significantly.
This reduces the risk that the US could run into serious fiscal trouble at some point in the future, with sharp tax hikes or major spending cuts required to correct it.
On foreign and trade policy, Biden will be much more predictable than Trump. He will seek to reinforce global institutions such as the World Trade Organization (WTO), the United Nations and NATO, and the World Health Organization.
Although Biden will continue to pursue a hard line on China, he is likely do it through conventional channels such as the WTO, in contrast to Trump. He would also seek to re-establish the alliance between the US and the EU, instead of threatening a trade war, as Trump had done.
Of course, the election is not over until the final votes are counted and all the states make their final declarations in December. This leaves open the slim chance of two surprises.
First, the Democrats could win the Senate. In that case, Biden would enjoy the support of both houses of Congress.
In the near term, that would probably lead to a much bigger fiscal stimulus and a serious lurch to the left on economic and social policies. Further out, corrective fiscal policies and the increasing weight of excess regulation would harm US economic performance, though.
Second, Trump could win his legal challenges and retain the White House but Congress with a split. In such an outcome, the next four years would look similar to the past four.
Without a future election to concern himself with – thanks to the two-term limit in the US – a re-elected Trump could double down on his hard-line foreign and trade policies, and further contribute to global instability.
But neither outcome looks likely.
The closely fought election and split Congress reflect a divided nation. Although the Democrats look to have successfully beaten Trump, they will not have a free run at setting policy.
The significant checks and balances against the new president’s policy agenda will leave Democrats feeling frustrated and Republicans feeling partly relieved.
While this outcome probably is not a recipe for the reconciliation between the left and right that the US badly needs, and may store up trouble for the future, it is perhaps the best outcome for the global economy.
Kallum Pickering is senior economist at Berenberg Bank