I can definitely say it's not negative traits for the Merchant(s).
This guy modified his game (descr_strat) to make his settlements start at a larger size and got hit by this in the early game; as you can see, no negative traits and 0 income. This always happens in late game and has for many versions of this mod. By late game essentially every settlement you own is at least of city-level, meaning you could have every single one of your 30-50 settlements giving you the "trade_base_income_bonus bonus -1 requires factions { all, }" . It is in such a situation that you see the total disappearance of all income that is in any way related to commerce. Trade income drops to 0, every one of your merchants, on any resource type, will yield 0 gold.
Here it is reported back in 2015 - the guy tries to link treasury size to diminishing merchant income. As his treasury will naturally increase the larger his kingdom gets, the larger his settlements become and more trade-related buildings he constructs (plus economy was a bit out of whack 4 years ago), I believe it is actually the number of settlements that give the trade_base_income penalty (as his kingdom got larger), that caused his issue. And
here is a 3.5 campaign, 62 turns in, when his rather large empire is starting to have quite a few city-level size and above settlements.
EDIT: So I just did a series of tests. First is using the Wudoumi Sect (mongols). At campaign start they possess one City-level (stone_wall) settlement and one castle (wooden_castle). Then I use Ba-Shu, with one test at game start and a second test with all core-buildings having -1 trade_income_bonus, to represent a mid-game faction with numerous larger cities where this penalty would take hold.
Test #1: No changes. Using my recently modified files (removed all trade_income bonuses and penalties from core buildings and increased resource value x3 in descr_sm_resources)
Result:
99 wuzhu
Test #2: added "trade_base_income_bonus bonus 5 requires factions { all, }" to stone_wall core building
Result:
137 wuzhu
Test #3: added "trade_base_income_bonus bonus 5 requires factions { all, }" to stone_wall core building & removed all buildings from Hanzhong except stone_wall core building
Result:
129 wuzhu
Test #4: added "trade_base_income_bonus bonus 5 requires factions { all, }" to stone_wall and wooden_castle core buildings & removed all buildings from Hanzhong except stone_wall core building
Result:
129 wuzhu
Test #5: Same as Test #1, except added "trade_base_income_bonus bonus -1 requires factions { all, }" to stone_wall
Result:
91 wuzhu
Test #6: Same as Test #1, except added "trade_base_income_bonus bonus -1 requires factions { all, }" to stone_wall and wooden_castle
Result:
84 wuzhu
Test #7: Same as Test #1, except added "trade_base_income_bonus bonus -1 requires factions { all, }" to stone_wall and wooden_castle & removed all buildings from Hanzhong except stone_wall core building
Result:
76 wuzhu
Test #8: Same as Test #1, except added "trade_base_income_bonus bonus -5 requires factions { all, }" to stone_wall
Result:
84 wuzhu
Test #9: added "trade_base_income_bonus bonus -5 requires factions { all, }" to stone_wall and wooden_castle
Result:
23 wuzhu
Test #10: Used Ba-Shu (11 settlements = 1 stone_wall, 5 wooden_wall, 3 wooden_pallisade, 3 wooden_castle) with same files as Test #1
Result:
106 wuzhu
Test #11: Same as Test #10, added "trade_base_income_bonus bonus -1 requires factions { all, }" to all above-mentioned core_buildings.
Result:
15 wuzhu
Conclusion: As an FYI, when I refer to "bonus" I am referring to a positive bonus, while "penalty" is a negative bonus. There are several things that I got from this series of tests. First is that trade income and resource value are intertwined more than the modding community had come to believe. We all know that trade buildings (roads, markets, ports, etc.) increase a settlement's trade income, a merchant's skills affects how much money they get from a resource, and the value of a resource in descr_sm_resources affects both the trade income of a settlement and how much money a merchant gains from the resource. It is also known that the trade_base_income_bonus capability can be set as both negative and positive, but exactly how those worked was misunderstood by modders.
First, a bonus only affects the local settlement, meaning it does not stack or globally affect the faction (tests #3 & #4). Second, a penalty not only affects the local settlement, but also stacks with other trade_base_income penalties in other settlements and affects the faction globally. Third, both bonuses and penalties affect the value of resources (money merchants make from a resource). Fourth, while trade income is known to be derived, at least partially, from the type and amount of resources in that setlement's region, trade income and resource values are apparently directly connected, with penalties/bonuses to the former having a direct effect on the value of the latter. So if a trade_income penalty is applied to a specific building, and multiple settlements construct that building, both trade income and the amount of money merchants get from a resource will drop dramatically - even to 0. With just 11 settlements (in Tests #10 & #11) giving a -1 penalty, the value of the Dye resource dropped
86% - from 106 to only 15! Similarly, with the Wudoumi Sect, when comparing 1 settlement to 2 settlements (Test #8 & #9) with a -5 penalty in each, the value of the Dye resource dropped
73% - from 84 (1 settlement with penalty) to only 23 (2 settlements with penalty)! So, to finalize, attempting to control a faction's income by lowering its trade income via penalties has had the unforeseen consequence of lowering global trade resource values and making merchants utterly useless.