$\mathrm{tr}(AB)=\sum\limits_{i=1}^n \sum\limits_{j=1}^n a_{ij}*b_{ji}$
$\mathrm{tr}(A)*\mathrm{tr}(B)=\sum\limits_{i=1}^n a_{ii}*\sum\limits_{i=1}^n b_{ii}$
Therefore $\mathrm{tr}(AB) \neq \mathrm{tr}(A)*\mathrm{tr}(B)$
Is the proof valid?
$\mathrm{tr}(AB)=\sum\limits_{i=1}^n \sum\limits_{j=1}^n a_{ij}*b_{ji}$
$\mathrm{tr}(A)*\mathrm{tr}(B)=\sum\limits_{i=1}^n a_{ii}*\sum\limits_{i=1}^n b_{ii}$
Therefore $\mathrm{tr}(AB) \neq \mathrm{tr}(A)*\mathrm{tr}(B)$
Is the proof valid?
It is false. Let's think small. Consider the identity matrix, of order $n > 1$. Then: $$n = \mathrm{tr}(I) = \mathrm{tr}(I \cdot I) \neq \mathrm{tr}(I)~ \mathrm{tr}(I) = n^2$$ It is important to try some silly cases and gain intuition about the affirmation before tackling summations, etc.
You have not given a reason why those expressions are not identically equal. They will be equal in some special cases. The easiest way to prove that such an identity doesn't hold is to give a counterexample. Try 2-by-2 matrices.
Your proof for any $n\ge2$ is valid, since for any non-zero ring $R$, the two multivariate polynomials $$P_n:=\sum_{1\le i,j\le n}a_{i,j}b_{j,i},\quad Q_n:=\sum_{1\le i,j\le n}a_{i,i}b_{j,j}\in S:=R[a_{i,j},b_{i,j}]_{1\le i,j\le n}$$ are then obviously distinct, which means that the matrices $A=(a_{i,j}),B=(b_{i,j})\in M_n(S)$ are such that $$\operatorname{tr}(AB)\ne\operatorname{tr}(A)\operatorname{tr}(B).$$
Even worse: for any non-zero ring $S$, there exist matrices $A,B\in M_n(S)$ such that $\operatorname{tr}(AB)\ne\operatorname{tr}(AB)\operatorname{tr}(AB)$: for instance, $P_n$ contains the monomial $a_{1,2}b_{2,1}$, whereas $Q_n$ doesn't, which leads to the counterexample $A=\pmatrix{0&1&0&\dots&0\\0&0&0&\dots&0\\&&\dots&&\\0&&\dots&&0 },B=\pmatrix{0&0&0&\dots&0\\1&0&0&\dots&0\\&&\dots&&\\0&&\dots&&0 }\in M_n(S)$.