The disputed result has fuelled stock market unease

There has already been some talk in the Bush camp about the looming recession reinforcing the need for tax cuts, the main plank of Mr Bush's economic policy.

In order to get his plans through a divided Congress, some moderate Democrats will have to be involved in economic policy decisions.

But Mr Bush, as a moderate Republican, also faces the same dilemma as his father, with members of his own party committed to a more radical free market agenda than he is.

And the economic slowdown could reduce the size of the budget surplus that Mr Bush is planning to give back to the public in the form of tax cuts.

On trade, Mr Bush has emphasized the need to reach agreement on a free trade zone in the Americas to rival the EU.

Economic challenges

The rapidly slowing economy has worried Wall Street after a rash of profit warnings and left the stock market shaky.

Luckily for the markets, Alan Greenspan, the chairman of the US central bank, the Federal Reserve, has already been appointed to another four year term - and will serve as the economic anchor during any storms ahead.

Mr Greenspan's policies on interest rates have been widely credited with preserving the longest-ever US boom, the markets are looking to the Fed to cut interest rates in the New Year if the economic slowdown gathers pace.

The operation will have to be carefully managed, however.

Lower interest rates and a lower stock market could precipitate a flight from the US dollar, which could also be weakened by the huge and growing trade deficit.

And the huge debts built up by companies and individuals during the boom years could make them more vulnerable in any downturn.

Supply side economics

A key signal of Mr Bush's intentions will be who he appoints as secretary of the treasury.

Lawrence Lindsey: Leading contender for Secretary of the Treasury

The leading candidate is Lawrence Lindsey, a former member of the Federal Reserve who is a leading advocate of supply-side tax cuts.

It was Mr Lindsey who designed Mr Bush's $1.3 trillion tax cut proposal, which will see the highest tax rate go down from 39% to 33%. Mr Lindsey also advocates the abolition of all inheritance taxes to encourage wealth creation.

Mr Lindsey argues that boosting the economy by tax cuts will lead to greater entrepreneurship and investment, raising the productive level of the economy and allowing it to operate without inflation.

Ronald Reagan's economic legacy has proved divisive

In the 1980s such theories were denounced by Mr Bush's father as "voodoo economics" and led to a protracted conflict between the US central bank, the Federal Reserve, and the Reagan administration.

At that time the US was running a huge budget deficit, and the Fed feared that further tax cuts would be inflationary.

It raised interest rates sharply, precipitating a recession in 1981.

Now the US is running a budget surplus - and Mr Bush believes that giving the money back to the people will not cause the same difficulties.

That will depend, however, on keeping spending under control, with the outrgoing Congress already pledging to spend about one-third of the projected $4,000bn surplus.

Alan Greenspan opposes heavy tax cuts

And that figure itself could be subject to revision if the slowdown is prolonged.

Trade wars

The huge US trade deficit, combined with any pressure on the dollar, could lead to more tensions with America's main trading partners.

Mr Bush is committed in principle to free trade - but he is also likely to be a strong defender of US interests.

Mr Bush's most likely trade adviser, Josh Bolten, is an experienced negotiator who helped shape the aggressive "Super 301" legislation in the l980s under US Trade Representative Carla Hills - who also led successful negotations for a new trade round.

The problem for Mr Bush, however, is the US Congress, which has become increasingly protectionist.

Traditionally, the US has taken the lead in trade negotiations - but following the debacle in Seattle it is unlikely that Mr Bush would want to waste precious political capital trying to restart a new trade round.

Rather, his interests focus on attempts to create a free trade zone throughout the Americas, extending the North America Free Trade Agreement (NAFTA) to other countries like Chile and Argentina.

But he would need to get a new negotiating mandate through Congress - something President Clinton has failed to do.

Free markets and deregulation

However, a Bush administration is likely to take an aggressive line in defending the interests of US companies abroad, for example in the dispute with the EU over the foreign sales tax exemption granted to big US companies.

And his advisers show little appetite for any form of international policy co-ordination, for example currency intervention to boost the euro.

The current Treasury Secretary, Lawrence Summers, has maintained a strong dollar policy - but has been willing to help when both the yen and the euro got into trouble.

That high dollar policy has been crucial in helping to keep inflation in check, and will be essential for any Bush administration that is contemplating large tax cuts.

In addition, the Clinton administration has had an ambiguous attitude to deregulation and monopoly - prosecuting Microsoft for anti-trust violations, but freeing up the airwaves.

A Bush administration is likely to push the pace of deregulation further, especially in areas of health and environmental protection, allowing more oil exploration and taking a less confrontational stance towards the tobacco companies.

In addition, the Bush plans to help people pay for the cost of prescription drugs - by subsidising the cost of private medical insurance - is less likely to lead to controls on the price of drugs, boosting the prospects of pharmaceutical companies.