Normalize match type usage during implicit lookup

compiler/src/dotty/tools/dotc/core/TypeComparer.scala

@@ -3180,7 +3180,7 @@ class TrackingTypeComparer(initctx: Context) extends TypeComparer(initctx) {
             tp
       case Nil =>
         val casesText = MatchTypeTrace.noMatchesText(scrut, cases)
-        throw TypeError(em"Match type reduction $casesText")
+        throw MatchTypeReductionError(em"Match type reduction $casesText")
 
     inFrozenConstraint {
       // Empty types break the basic assumption that if a scrutinee and a

compiler/src/dotty/tools/dotc/core/TypeErrors.scala

@@ -46,6 +46,9 @@ object TypeError:
     def toMessage(using Context) = msg
 end TypeError
 
+class MatchTypeReductionError(msg: Message)(using Context) extends TypeError:
+  def toMessage(using Context) = msg
+
 class MalformedType(pre: Type, denot: Denotation, absMembers: Set[Name])(using Context) extends TypeError:
   def toMessage(using Context) = em"malformed type: $pre is not a legal prefix for $denot because it contains abstract type member${if (absMembers.size == 1) "" else "s"} ${absMembers.mkString(", ")}"
 

compiler/src/dotty/tools/dotc/typer/Implicits.scala

@@ -634,6 +634,13 @@ trait ImplicitRunInfo:
             case t: TypeLambda =>
               for p <- t.paramRefs do partSeen += p
               traverseChildren(t)
+            case t: MatchType =>
+              traverseChildren(t)
+              traverse(try t.normalized catch case _: MatchTypeReductionError => t)
+            case MatchType.InDisguise(mt)
+                if !t.isInstanceOf[LazyRef] // skip recursive applications (eg. Tuple.Map)
+            =>
+              traverse(mt)
             case t =>
               traverseChildren(t)
 

tests/pos/i17395.scala

@@ -0,0 +1,25 @@
+trait TC[T]
+
+object TC {
+  def optionTCForPart[T](implicit tc: TC[ExtractPart[T]]): TC[Option[ExtractPart[T]]] = new TC[Option[ExtractPart[T]]] {}
+}
+
+type ExtractPart[T] = T match {
+  case PartField[t] => t
+}
+type PartField[T] = Any { type Part = T }
+
+class ValuePartHolder {
+  type Part = Value
+}
+
+class Value
+object Value {
+  implicit val tcValue: TC[Value] = new {}
+}
+
+@main def main(): Unit = {
+//  import Value.tcValue // explicit import works around the issue, but shouldn't be necessary
+  val tc = TC.optionTCForPart[ValuePartHolder]
+  println(tc)
+}