diff --git a/apps/server/src/diagnostics/TraceDiagnostics.test.ts b/apps/server/src/diagnostics/TraceDiagnostics.test.ts
index d4ffa4a5fc2..70bb4dc815c 100644
--- a/apps/server/src/diagnostics/TraceDiagnostics.test.ts
+++ b/apps/server/src/diagnostics/TraceDiagnostics.test.ts
@@ -3,8 +3,10 @@ import * as DateTime from "effect/DateTime";
 import * as Effect from "effect/Effect";
 import * as FileSystem from "effect/FileSystem";
 import * as Layer from "effect/Layer";
+import * as Logger from "effect/Logger";
 import * as Option from "effect/Option";
 import * as PlatformError from "effect/PlatformError";
+import * as References from "effect/References";
 
 import * as TraceDiagnostics from "./TraceDiagnostics.ts";
 
@@ -187,18 +189,17 @@ describe("TraceDiagnostics", () => {
   it.effect("keeps loaded trace data when one rotated trace file fails to read", () =>
     Effect.gen(function* () {
       const traceFilePath = "/tmp/server.trace.ndjson";
+      const readFailure = PlatformError.systemError({
+        _tag: "PermissionDenied",
+        module: "FileSystem",
+        method: "readFileString",
+        description: "permission denied",
+        pathOrDescriptor: `${traceFilePath}.1`,
+      });
       const fileSystemLayer = FileSystem.layerNoop({
         readFileString: (path) =>
           path === `${traceFilePath}.1`
-            ? Effect.fail(
-                PlatformError.systemError({
-                  _tag: "PermissionDenied",
-                  module: "FileSystem",
-                  method: "readFileString",
-                  description: "permission denied",
-                  pathOrDescriptor: path,
-                }),
-              )
+            ? Effect.fail(readFailure)
             : Effect.succeed(
                 record({
                   name: "server.getConfig",
@@ -209,20 +210,44 @@ describe("TraceDiagnostics", () => {
                 }),
               ),
       });
+      const logAnnotations: Array<Record<string, unknown>> = [];
+      const logger = Logger.make<unknown, void>((options) => {
+        logAnnotations.push({ ...options.fiber.getRef(References.CurrentLogAnnotations) });
+      });
 
       const diagnostics = yield* TraceDiagnostics.readTraceDiagnostics({
         traceFilePath,
         maxFiles: 1,
         readAt: DateTime.makeUnsafe("2026-05-05T10:00:00.000Z"),
-      }).pipe(Effect.provide(TraceDiagnostics.layer.pipe(Layer.provide(fileSystemLayer))));
+      }).pipe(
+        Effect.provide(
+          Layer.mergeAll(
+            TraceDiagnostics.layer.pipe(Layer.provide(fileSystemLayer)),
+            Logger.layer([logger], { mergeWithExisting: false }),
+          ),
+        ),
+      );
 
       assert.equal(diagnostics.recordCount, 1);
       assert.equal(
         Option.getOrElse(diagnostics.partialFailure, () => false),
         true,
       );
-      assert.equal(Option.getOrUndefined(diagnostics.error)?.kind, "trace-file-read-failed");
+      assert.deepStrictEqual(Option.getOrUndefined(diagnostics.error), {
+        kind: "trace-file-read-failed",
+        message: `Failed to read local trace file '${traceFilePath}.1'.`,
+      });
       assert.deepStrictEqual(diagnostics.scannedFilePaths, [`${traceFilePath}.1`, traceFilePath]);
+
+      const failureLog = logAnnotations.find(
+        (annotations) => annotations.traceFilePath === `${traceFilePath}.1`,
+      );
+      assert.exists(failureLog);
+      assert.deepStrictEqual(failureLog, {
+        traceFilePath: `${traceFilePath}.1`,
+        errorTag: "TraceFileReadError",
+        causeTag: "PermissionDenied",
+      });
     }),
   );
 
diff --git a/apps/server/src/diagnostics/TraceDiagnostics.ts b/apps/server/src/diagnostics/TraceDiagnostics.ts
index d396f4e4ee9..d54e033380c 100644
--- a/apps/server/src/diagnostics/TraceDiagnostics.ts
+++ b/apps/server/src/diagnostics/TraceDiagnostics.ts
@@ -14,6 +14,8 @@ import * as FileSystem from "effect/FileSystem";
 import * as Layer from "effect/Layer";
 import * as Option from "effect/Option";
 import * as PlatformError from "effect/PlatformError";
+import * as Result from "effect/Result";
+import * as Schema from "effect/Schema";
 
 interface TraceRecordLike {
   readonly name?: unknown;
@@ -39,6 +41,19 @@ export interface TraceDiagnosticsOptions {
   readonly readAt?: DateTime.Utc;
 }
 
+export class TraceFileReadError extends Schema.TaggedErrorClass<TraceFileReadError>()(
+  "TraceFileReadError",
+  {
+    traceFilePath: Schema.String,
+    causeTag: Schema.String,
+    cause: Schema.Defect(),
+  },
+) {
+  override get message(): string {
+    return `Failed to read local trace file '${this.traceFilePath}'.`;
+  }
+}
+
 export class TraceDiagnostics extends Context.Service<
   TraceDiagnostics,
   {
@@ -153,10 +168,6 @@ function isNotFoundError(error: PlatformError.PlatformError): boolean {
   return error.reason._tag === "NotFound";
 }
 
-function platformErrorMessage(error: PlatformError.PlatformError): string {
-  return error.message || String(error);
-}
-
 function insertBoundedSlowestSpan(
   slowestSpans: ServerTraceDiagnosticsSpanOccurrence[],
   span: ServerTraceDiagnosticsSpanOccurrence,
@@ -377,22 +388,26 @@ export function aggregateTraceDiagnostics(
 
 type TraceFileReadResult =
   | { readonly _tag: "Loaded"; readonly path: string; readonly text: string }
-  | { readonly _tag: "Missing"; readonly path: string }
-  | { readonly _tag: "Failed"; readonly path: string; readonly message: string };
+  | { readonly _tag: "Missing"; readonly path: string };
 
 function readTraceFile(
   fileSystem: FileSystem.FileSystem,
   path: string,
-): Effect.Effect<TraceFileReadResult> {
+): Effect.Effect<TraceFileReadResult, TraceFileReadError> {
   return fileSystem.readFileString(path).pipe(
-    Effect.map((text) => ({ _tag: "Loaded" as const, path, text })),
-    Effect.catch((error: PlatformError.PlatformError) =>
-      Effect.succeed(
-        isNotFoundError(error)
-          ? { _tag: "Missing" as const, path }
-          : { _tag: "Failed" as const, path, message: platformErrorMessage(error) },
-      ),
-    ),
+    Effect.map((text): TraceFileReadResult => ({ _tag: "Loaded", path, text })),
+    Effect.catchTags({
+      PlatformError: (cause) =>
+        isNotFoundError(cause)
+          ? Effect.succeed<TraceFileReadResult>({ _tag: "Missing", path })
+          : Effect.fail(
+              new TraceFileReadError({
+                traceFilePath: path,
+                causeTag: cause.reason._tag,
+                cause,
+              }),
+            ),
+    }),
   );
 }
 
@@ -405,19 +420,34 @@ export const make = Effect.gen(function* () {
       const slowSpanThresholdMs = options.slowSpanThresholdMs ?? DEFAULT_SLOW_SPAN_THRESHOLD_MS;
       const paths = toRotatedTracePaths(options.traceFilePath, options.maxFiles);
       const results = yield* Effect.all(
-        paths.map((path) => readTraceFile(fileSystem, path)),
+        paths.map((path) =>
+          readTraceFile(fileSystem, path).pipe(
+            Effect.tapError((cause) =>
+              Effect.logWarning("Failed to read local trace file.").pipe(
+                Effect.annotateLogs({
+                  traceFilePath: cause.traceFilePath,
+                  errorTag: cause._tag,
+                  causeTag: cause.causeTag,
+                }),
+              ),
+            ),
+            Effect.result,
+          ),
+        ),
         {
           concurrency: 1,
         },
       );
       const files = results.flatMap((result) =>
-        result._tag === "Loaded" ? [{ path: result.path, text: result.text }] : [],
+        Result.isSuccess(result) && result.success._tag === "Loaded"
+          ? [{ path: result.success.path, text: result.success.text }]
+          : [],
       );
-      const readFailure = results.find((result) => result._tag === "Failed");
+      const readFailure = results.find(Result.isFailure);
       const readFailureError = readFailure
         ? ({
             kind: "trace-file-read-failed",
-            message: readFailure.message.trim() || `Failed to read ${readFailure.path}.`,
+            message: readFailure.failure.message,
           } satisfies TraceDiagnosticsErrorSummary)
         : undefined;