Exploiting the US’s granting of Permanent Normal Trade Relation (PNTR) to China, this paper examines the effects of the reduction in trade policy uncertainty (TPU) on Chinese manufacturing firms and the associated ex- port and labor markets. I document that a larger reduction in TPU led to a higher share of exports to the US and a higher share of ordinary exports both extensively and intensively. I provide evidence that the granting of PNTR encouraged the transition from processing to ordinary form for ex- ports to the US as well as exports to the world. Firms more exposed to the TPU reduction experienced greater losses in the growth of revenue, profits, wages and labor productivity, which might be explained by the negative externality from the decreased total export growth due to the transition.