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The impact of policy uncertainty on exports and imports (trade) between Pakistan and China is estimated in this study and the impact of trade on economic welfare is analyzed. Secondary data from 1972 to 2018 is taken from WDI. Pooled OLS is applied to achieve the study objectives. The impact of change in Policy Uncertainty (PU) between Pakistan and China is negative and significant. It is concluded that when policy uncertainty increases exports and imports (trade) between Pakistan and the China decreases because the trading partner of the home country feels insecure about their exported and imported products which affects the exports and imports (trade) negatively. ARMA Likelihood model is applied to check the impact of trade on economic welfare of the country. Results show that the impact is positive and significant. It is recommended that exports to Pakistan will increase if policy uncertainty is removed. Reducing tariff policy uncertainty will increase the competitiveness of Pakistan and China due to which the quality of production will be increased and Trade will improve.