diff --git a/src/Tracing.jl b/src/Tracing.jl
index 015a2ccff7..01994452c7 100644
--- a/src/Tracing.jl
+++ b/src/Tracing.jl
@@ -736,7 +736,7 @@ Base.@nospecializeinfer function traced_type_inner(
     end
 
     if !isempty(subParms)
-        TT2 = Core.apply_type(T.name.wrapper, subParms...)
+        TT2 = apply_type_with_promotion(T.name.wrapper, subParms)
     else
         TT2 = T
     end
@@ -745,6 +745,14 @@ Base.@nospecializeinfer function traced_type_inner(
     if fieldcount(T) == fieldcount(TT2)
         legal = true
         for f in 1:fieldcount(T)
+            if isa(Base.unwrap_unionall(T.name.wrapper).types[f], TypeVar)
+                # The field is constrained by a TypeVar directly,
+                # so we don't need to check.
+                # (The check below would fail if the typevar was promoted as
+                # we don't get the same result when calling traced_type_inner
+                # on the field type directly.)
+                continue
+            end
             subT = fieldtype(T, f)
             subT2 = fieldtype(TT2, f)
             subTT = traced_type_inner(subT, seen3, mode, track_numbers, sharding, runtime)
@@ -857,6 +865,77 @@ const traced_type_cache = Dict{Tuple{TraceMode,Type,Any},Dict{Type,Type}}()
 #     $(Expr(:meta, :generated, traced_type_generator))
 # end
 
+"""
+This function tries to apply the param types to the wrapper type.
+When there's a constraint conflict, it tries to resolve it by promoting the conflicting types. The new param type is then propagated in any param type that depends on it.
+"""
+function apply_type_with_promotion(wrapper, params, relevant_typevars=typevar_dict(wrapper))
+    unwrapped = Base.unwrap_unionall(wrapper) # remove all the typevars
+    params = [params...]
+
+    changed = true
+    iter = 0
+    while changed && iter < 100
+        changed = false
+        for (i, param) in enumerate(params)
+            # Add back the typevars to only one of the parameters:
+            rewrapped = Base.rewrap_unionall(unwrapped.parameters[i], wrapper)
+
+            sz = @ccall jl_subtype_env_size(rewrapped::Any)::Cint
+            arr = Array{Any}(undef, sz)
+
+            # Verify that the currently selected parameter subtypes the param in the wrapper type.
+            # In the process, `arr` is filled with with the required types for each parameter used by the current parameter:
+            is_subtype =
+                (@ccall jl_subtype_env(
+                    params[i]::Any, rewrapped::Any, arr::Ptr{Any}, sz::Cint
+                )::Cint) == 1
+            !is_subtype && error(
+                "Failed to find a valid type for typevar $i ($(params[i]) <: $(rewrapped) == false)",
+            )
+
+            # Check whether the required types are supertypes of all the parameter types we currently have:
+            current_unionall = rewrapped
+            for value in arr
+                # Peel open the unionall to figure out which typevar each `value` corresponds to:
+                typevar = current_unionall.var
+                current_unionall = current_unionall.body
+
+                # `param` might have other typevars that don't occur in `wrapper`,
+                # here we first check if the typevar is actually relevant:
+                if haskey(relevant_typevars, typevar)
+                    param_i = relevant_typevars[typevar]
+                    value <: params[param_i] && continue
+
+                    # Found a conflict! Figure out a new param type by promoting:
+                    promoted = promote_type(value, params[param_i])
+                    params[param_i] = promoted
+
+                    if value != promoted
+                        # This happens when `value` lost the promotion battle.
+                        # At this point, we need to update the problematic parameter in`value`.
+                        d = typevar_dict(rewrapped)
+                        v = [param.parameters...]
+                        v[d[typevar]] = promoted
+                        params[i] = apply_type_with_promotion(rewrapped, v)
+                    end
+                    changed = true
+                end
+            end
+        end
+        iter += 1
+    end
+    return Core.apply_type(wrapper, params...)
+end
+
+function typevar_dict(t)
+    d = Dict()
+    for (i, name) in enumerate(Base.unwrap_unionall(t).parameters)
+        d[name] = i
+    end
+    return d
+end
+
 Base.@assume_effects :total @inline function traced_type(
     T::Type, ::Val{mode}, track_numbers::Type, sharding, runtime
 ) where {mode}
diff --git a/test/tracing.jl b/test/tracing.jl
index 21a4f6559b..3711f3279d 100644
--- a/test/tracing.jl
+++ b/test/tracing.jl
@@ -252,6 +252,22 @@ end
                 Reactant.XLA.runtime(),
             )
         end
+        @testset "apply_type_with_promotion" begin
+            struct Bar{T}
+                b::T
+            end
+            struct Foo{T,B<:Bar{T},AT<:AbstractArray{T}}
+                a::AT
+                b::B
+            end
+            @test Reactant.apply_type_with_promotion(
+                Foo, [Float64, Bar{Float64}, Reactant.TracedRArray{Float64,1}]
+            ) == Foo{
+                TracedRNumber{Float64},
+                Bar{TracedRNumber{Float64}},
+                Reactant.TracedRArray{Float64,1},
+            }
+        end
     end
 
     @testset "specialized dispatches" begin