Sustainable policy uncertainty: How trade wars, partisan politics, and policy volatility shape the U.S. green transition

Abstract

This study examines the dynamic drivers of sustainable policy uncertainty in the United States from 2002 to 2025 using a time‐varying parameter vector autoregression (TVP‐VAR) framework. Sustainable Uncertainty is operationally defined as the ESG‐Based Sustainability Uncertainty Index, which captures news‐based uncertainty surrounding environmental, social, and governance factors critical for long‐term investment and policy decisions. Moving beyond static framework, siloed approaches, our analysis jointly models economic policy uncertainty (EPU), trade policy uncertainty (TPU), U.S.–China trade tensions, geopolitical risk, monetary policy, and partisan political shifts to capture the evolving transmission of shocks to sustainability policy. Results reveal that TPU and US–China tensions are the most persistent structural drivers, particularly during periods of protectionism. EPU acts as a central transmission hub, embedding sustainability concerns within broader macro‐financial conditions. The Trump presidency constitutes a clear structural break, during which trade‐related and political shocks became significantly more persistent, generating hysteresis effects that sustained elevated uncertainty beyond individual episodes. Hierarchical and network analyses suggest that sustainability uncertainty is primarily anchored in macro‐financial conditions, while trade and political regime shocks operate as distinct structural amplifiers, though these findings are conditional on the chosen index and model specification. The findings underscore that reducing Sustainable Uncertainty requires policy credibility, stable trade governance, and insulating long‐term green investments from partisan cycles, with the caveat that the results are sensitive to the sample period and measurement of geopolitical risk.