Oh yes.
The problem is that Illustrator does not support transparency in traced images — AT ALL. When you trace an image with a transparent background, it first flattens it to white — always — and only then performs the segmentation, fitting, etc. So in this case it just becomes pure white.
This is extremely stupid, and the recent 'pick color to remove' option does not help with it either.

There is a workaround you can use for now...
Select the image (make sure it's' embedded). Go Edit > Edit Colors > Invert Colors. You’ll get black on transparent. Trace it, remove white, expand and invert colors back. This hardly works if you have other colors, and also black, and they both touch the transparent areas — in this cases parts will go missing.
The more complex workaround would be to flatten or re-rasterize the image with an undercoat, using a color that is not used in your image...

But truly the team should just fix this.

Illustrator Version: 27.7
Mac OS: 13.4.1

When using image trace on embedded art that is 1-color (white) with a transparent background, image trace always fails, and sometimes the program crashes. Does not happen if the embedded image is black with a transparent background.

This is nonsense.
Replacing transparent pixels with white is no something anyone wants.

In image trace, clear portion of a png should not be considered "white" as "ignore white" loses functionality.

@egor Thank you.
Unfortunately, I do not use Illustrator to such advanced level to know or understand this sentence:
"Trace with ignore white, have only black lines. Make a copy of your artwork below. Release this compound path. Apply Pathfinder Add. Fill white. Select all, Pathfinder Merge."
I did it manually yesterday on 300 images. I traced them all black and then added a white version in the back, basically, it was an entire day of CTRL+B, CTRL+S CTRL+W.
Plus I wanted to set the action to save as SVG but instead of doing it automatically, it keeps asking me to click OK.
Regarding settings to 100, that was how I got some white interior inside.

I was hoping I could have white parts split as I get them when tracing normally (the only issue is that extra white block in the back. Then with all those white parts, I could run the script for random swatches fill and get the drawing colored in one click.

Wish there was a way to set auto delete that white block in the back. I thought it would be easy, just set magic wand at 1/1 pixel and delete that selection.

But, since everything should be learning process I tried this:

a) Image trace ignore white
b) Copy and paste in back - at this step I can't do anything so I guess I have to click Expand under object menu with the bottom layer selected
c) Under Object menu in the bottom find Compound path and click on release. This will make all black
d) click on fill in left menu or Color in right menu or if none of them are visible under Window pick Color in my case white
e) Click save as SVG if it is done manually, if it is set as an action not sure how to auto-set saving as SVG?

And also fit the artboard to artwork somehow.

I created an action that goes as mentioned above, it stops at Expand to ask me OK and it stopes at saving asking me to pick svg. So it is semi-automatic, but still better than what I did yesterday. Thank you.

True, Ai does not have an option to ignore only outside white, only all or nothing. But in your case an action can be recorded (not a script even) that can make it automatically.

Trace with ignore white, have only black lines. Make a copy of your artwork below. Release this compound path. Apply Pathfinder Add. Fill white. Select all, Pathfinder Merge.

A workaround, but should work.

I wonder also why do you set 100 colors, when you have only 2?

When we trace transparent black and white images where we want to keep white interior and outside transparent in place of transparent we get a white block that can not be removed with scripting or batch, only manually after expand. There should be a setting the image traces only the actual image, not adding BG where there is none.

I have the same problem. When I image trace a .png that has transparency, all the transparency is lost in the final product. If I press "ignore white" I still get a harsh outline and flat colors rather than the soft blurry translucent edges of the original .png

You can change your default image trace settings, by adding a custom script to it. Here is a link on how to do it: https://community.adobe.com/t5/illustrator/batch-image-trace-with-transparent-background/td-p/11210899?page=1

If you want to batch convert bitmaps to vector with the advanced "ignore white", there is also very simple solution to do that Here's how:

Open Illustrator (2020). Create a preset in Illustrator for tracing (goto "Windows > Image Trace"). I made a preset and called it "BW-No-White". The preset is set to convert to black and ignore white (= ignore white backgrounds).

Then open "Adobe Bridge". Within Bridge, go to the folder where you have your bitmaps that you would like to batch convert to vectors. Within Bridge, Select "Tools>Illustrator>Image Trace". Select your preset (which you set up prior in Illustrator). Set you destination folder and click OK. That's it. No need to script anything!

I would like the feature to trace a png image with white body and alpha channel active.

Sometimes my clients send me a PNG with transparency to work with, like a logo or graphic of their own. To speed up the process I tend to vectorize with Image Trace because I need it in vectors, but it's impossible if the image is with white body and transparency because I end up with a solid white rectangle.

In this cases, I need to open Photoshop, add my png, create a clipping mask, paint with the brush using any color except white, export, open again in Illustrator, and now i can Image Trace it.

THIS IS DRIVING ME MENTAL! need a solution asap 😥

When I take a image with a transparent background I expect after I expand it that there is no white background added to it and it remains transparent.

This is not what is happening, I get a white background when using image trace and it adds SO MUCH time and tedious work to remove all the white from very complex images.

For the cost of this program this is like a punishment, Im paying adobe to put me through **** in my own work. Not cool adobe, not cool....

DROPBOX LINK: (124.00 MB)
https://www.dropbox.com/s/0a95p310ufwq749/Capto_Capture%202017-12-20_11-09-35_PM.mov?dl=0