Mr Trump's surprise Twitter announcement on Wednesday has been met with criticism from rights groups.
Spokeswoman Sarah Sanders said the administration would work alongside the Pentagon to decide how to proceed.
It is not yet clear how the announcement will affect current transgender service personnel.
"The United States government will not accept or allow transgender individuals to serve in any capacity in the US military," Donald Trump tweeted.
"Our military must be focused on decisive and overwhelming victory and cannot be burdened with the tremendous medical costs and disruption that transgender in the military would entail."
Asked at a press briefing if troops on battlefields would be immediately sent back, White House spokeswoman Sarah Sanders said the policy had yet to be worked out.
"The decision is based on a military decision. It's not meant to be anything more than that," she said.
However, some US media outlets questioned the spending justification. The Washington Post drew attention to an analysis that the US military spends almost $42m a year on the erectile dysfunction medication Viagra - several times the total estimated cost of transgender medical support.
Meanwhile, Poltico reports that the move was prompted by threats from Republican hardliners over a spending bill which would provide funding for Mr Trump's promised military spending and border wall plans.
One Republican lawmaker had already tabled an amendment to the spending bill to prevent the military paying for transgender surgical procedures.