diff --git a/contracts/tools/tests/test_pic_traces_schema.py b/contracts/tools/tests/test_pic_traces_schema.py
index 8c72b60..ad087e3 100644
--- a/contracts/tools/tests/test_pic_traces_schema.py
+++ b/contracts/tools/tests/test_pic_traces_schema.py
@@ -1,8 +1,6 @@
-from copy import deepcopy
 from pathlib import Path
 
 from pic_contracts.schema_utils import CONTRACTS_ROOT, load_json, validator_for
-from pic_contracts.traces import trace_equivalence
 
 BASE = CONTRACTS_ROOT / "pic-traces" / "0.1.0" / "examples"
 
@@ -30,31 +28,3 @@ def test_invalid_traces_fail_for_intended_reason() -> None:
         assert any(message in error.message for error in errors)
 
 
-def test_trace_equivalence_levels() -> None:
-    trace = load_json(BASE / "valid" / "oia-response-deadline.json")
-    equal = deepcopy(trace)
-    assert trace_equivalence(trace, equal) == {
-        "output": True,
-        "path": True,
-        "semantic": True,
-        "diffs": [],
-    }
-
-    output_only = deepcopy(trace)
-    output_only["steps"][0]["stepId"] = "alternate_path"
-    assert trace_equivalence(trace, output_only)["output"] is True
-    assert trace_equivalence(trace, output_only)["path"] is False
-
-    path_different = deepcopy(trace)
-    path_different["outputs"]["nz-oia/decision.response_deadline"]["value"] = "2026-02-11"
-    result = trace_equivalence(trace, path_different)
-    assert result["output"] is False
-    assert result["path"] is False
-    assert result["semantic"] is False
-
-    semantic_different = deepcopy(trace)
-    semantic_different["steps"][0]["sourceRefs"] = ["different source"]
-    result = trace_equivalence(trace, semantic_different)
-    assert result["output"] is True
-    assert result["path"] is True
-    assert result["semantic"] is False
diff --git a/contracts/tools/tests/test_traces.py b/contracts/tools/tests/test_traces.py
new file mode 100644
index 0000000..9e2cd9d
--- /dev/null
+++ b/contracts/tools/tests/test_traces.py
@@ -0,0 +1,98 @@
+from copy import deepcopy
+
+from pic_contracts.schema_utils import CONTRACTS_ROOT, load_json
+from pic_contracts.traces import trace_equivalence
+
+BASE = CONTRACTS_ROOT / "pic-traces" / "0.1.0" / "examples"
+
+
+def test_trace_equivalence_levels() -> None:
+    trace = load_json(BASE / "valid" / "oia-response-deadline.json")
+    equal = deepcopy(trace)
+    result = trace_equivalence(trace, equal)
+    assert result == {
+        "output": True,
+        "path": True,
+        "semantic": True,
+        "diffs": [],
+    }
+
+    output_only = deepcopy(trace)
+    output_only["steps"][0]["stepId"] = "alternate_path"
+    result = trace_equivalence(trace, output_only)
+    assert result["output"] is True
+    assert result["path"] is False
+    assert result["semantic"] is False
+    assert result["diffs"] == [
+        {"level": "path", "message": "step IDs or parameter versions differ"}
+    ]
+
+    path_different = deepcopy(trace)
+    path_different["outputs"]["nz-oia/decision.response_deadline"]["value"] = "2026-02-11"
+    result = trace_equivalence(trace, path_different)
+    assert result["output"] is False
+    assert result["path"] is False
+    assert result["semantic"] is False
+    assert result["diffs"] == [
+        {"level": "output", "message": "outputs differ"}
+    ]
+
+    semantic_different = deepcopy(trace)
+    semantic_different["steps"][0]["sourceRefs"] = ["different source"]
+    result = trace_equivalence(trace, semantic_different)
+    assert result["output"] is True
+    assert result["path"] is True
+    assert result["semantic"] is False
+    assert result["diffs"] == [
+        {"level": "semantic", "message": "step source references differ"}
+    ]
+
+def test_trace_equivalence_empty() -> None:
+    # Test completely empty dictionaries
+    result = trace_equivalence({}, {})
+    assert result == {
+        "output": True,
+        "path": True,
+        "semantic": True,
+        "diffs": [],
+    }
+
+    # Test one empty dictionary
+    trace = load_json(BASE / "valid" / "oia-response-deadline.json")
+    result = trace_equivalence(trace, {})
+    assert result["output"] is False
+    assert result["path"] is False
+    assert result["semantic"] is False
+    assert result["diffs"] == [
+        {"level": "output", "message": "outputs differ"}
+    ]
+
+def test_trace_equivalence_missing_keys() -> None:
+    # Test traces missing 'outputs' or 'steps' but otherwise populated
+    trace1 = {"some_other_key": "value"}
+    trace2 = {"some_other_key": "value2"}
+
+    result = trace_equivalence(trace1, trace2)
+    assert result == {
+        "output": True,
+        "path": True,
+        "semantic": True,
+        "diffs": [],
+    }
+
+    trace_with_steps = {
+        "steps": [
+            {
+                "stepId": "s1",
+                "parameterVersions": [{"id": "p1", "effectiveFrom": "d1"}],
+            }
+        ]
+    }
+    trace_without_steps = {}
+    result = trace_equivalence(trace_with_steps, trace_without_steps)
+    assert result["output"] is True
+    assert result["path"] is False
+    assert result["semantic"] is False
+    assert result["diffs"] == [
+        {"level": "path", "message": "step IDs or parameter versions differ"}
+    ]