Transistors are hard to wrap my head around with laws
You have to remember that a transistor is a kind of "current valve". It allows an amount of current to pass between collector and emitter that is \$H_{fe}\$ times larger than the current that passes through the base of the transistor.

In your example \$H_{fe}\$ is apparently set to \$100\$. The base current is only \$186\mu{A}\$ so the collector current can not exceed \$18.6\mu{A}\$. (It could of course be less than that if the current is not available, at which point the transistor is saturated.)

As you expect the LED drops about \$2V\$ across it. The remaining \$7V\$ from the \$9V\$ supply is dropped across \$V_{ce}\$.

So in this instance the transistor is not acting as a switch, but as a linear current regulator. 

However, not a very good one since the \$H_{fe}\$ of transistors is actually a very vague value. If you wanted a current limiter, the circuit below is better and relies on a resistor value to set the current.

$$ I = 0.7/R1 $$







simulate this circuit &ndash; Schematic created using CircuitLab