[guided]We work locally because curvature forms of connections are determined by their values in local frames, and equality of local representatives on every such open set gives equality globally.
Choose an open set $U \subset X$ with a holomorphic frame $e_1,\dots,e_r$ for $E|_U$. Let $A^1(U)$ denote the space of smooth complex-valued one-forms on $U$. The Chern connection $\nabla^E$ can be written in this frame by declaring one-forms $\theta_{ij} \in A^1(U)$, for $1 \le i,j \le r$, through the formula
\begin{align*}\nabla^E e_j = \sum_{i=1}^r e_i \otimes \theta_{ij}.\end{align*}
The matrix $\theta=(\theta_{ij})$ is the local connection matrix of $\nabla^E$.
Before computing on the determinant line, we must identify which connection we are computing. Let $\widetilde{\nabla}$ denote the connection on $\Lambda^r E$ induced from $\nabla^E$ by differentiating one wedge factor at a time. We claim that $\widetilde{\nabla}$ is the same connection as the Chern connection $\nabla^{\det E}$ appearing in the theorem. The reason is that the defining properties of the Chern connection are preserved by taking the determinant exterior power. First, $\widetilde{\nabla}$ is compatible with the Hermitian metric on $\Lambda^r E$ induced from the metric $h_E$ on $E$: for decomposable local sections $u_1\wedge\cdots\wedge u_r$ and $v_1\wedge\cdots\wedge v_r$, the induced metric is the determinant of the matrix whose $(i,j)$ entry is $h_E(u_i,v_j)$. Differentiating this determinant and using the metric-compatibility of $\nabla^E$ differentiates one $u_i$ or one $v_j$ at a time, which is exactly the metric-compatibility identity for $\widetilde{\nabla}$. Second, the $(0,1)$-part of $\widetilde{\nabla}$ is the holomorphic structure on $\det E$: since $\nabla^E$ is the Chern connection, $(\nabla^E)^{0,1}=\bar\partial_E$, and the induced operator on $u_1\wedge\cdots\wedge u_r$ is the exterior derivation induced by $\bar\partial_E$, namely $\bar\partial_{\det E}$. Therefore $\widetilde{\nabla}$ satisfies the two defining properties of the Chern connection on the holomorphic Hermitian line bundle $\det E$. By uniqueness of the Chern connection, $\widetilde{\nabla}=\nabla^{\det E}$.
Now pass to the determinant line. Its local frame over $U$ is
\begin{align*}s := e_1 \wedge \cdots \wedge e_r.\end{align*}
The induced connection on an exterior product differentiates one factor at a time. Therefore
\begin{align*}\nabla^{\det E}s = \sum_{j=1}^r e_1 \wedge \cdots \wedge e_{j-1} \wedge \nabla^E e_j \wedge e_{j+1} \wedge \cdots \wedge e_r.\end{align*}
Substitute the connection formula for $\nabla^E e_j$. In the $j$th summand, the term involving $e_i \otimes \theta_{ij}$ contributes
\begin{align*}e_1 \wedge \cdots \wedge e_{j-1} \wedge e_i \wedge e_{j+1} \wedge \cdots \wedge e_r \otimes \theta_{ij}.\end{align*}
If $i \ne j$, then $e_i$ already appears elsewhere in the wedge product, so the alternating property of the exterior product makes this term zero. If $i=j$, the wedge product is exactly $s$. Hence only the diagonal terms survive, and we get
\begin{align*}\nabla^{\det E}s = s \otimes \sum_{j=1}^r \theta_{jj}.\end{align*}
This proves that the local connection one-form of the determinant connection is the trace one-form
\begin{align*}\operatorname{tr}(\theta) := \sum_{j=1}^r \theta_{jj}.\end{align*}[/guided]