A study by non-profit research think tank RAND found that there were between 1320 and 6630 active transgender officers in the US military as of last year.
The research is at odds with the President's assertion that having transgender people in the military amounted to "tremendous medical costs and disruption".
The study found that only a fraction of those officers - between 29 and 129 - would seek medical assistance related to gender transition that could "disrupt their ability to deploy".
This number was "negligible" compared to the 102,500 non-deployable soldiers in the army alone in 2015.
And it also concluded that the cost of offering transition-related healthcare to transgender personnel was "relatively low" - between $2.4 million and $8.4 million - which represents a 0.04 to 0.13 per cent increase in healthcare costs.
The study also examined the policies of militaries that were open to transgender personnel, including Australia.
"In no case did the RAND team find evidence of an effect on operational effectiveness, operational readiness or cohesion," the study found.
Former US soldier turned military whistleblower Chelsea Manning, who is a transgender woman, said that Trump's announcement "sounds like cowardice".
Trump's tweets also drew swift opposition from groups that represent transgender military personnel.
"It's an absolute absurdity and another overstep," said Matt Thorn of OutServe-Servicemembers Legal Defense Network, which advocates for the lesbian, gay, bisexual and transgender community in the military.
He said thousands had been serving in the US armed forces without causing any issues.
Trans/Gender Non-Conforming Justice Project director Victoria Rodriguez-Roldan said the transgender community "will not stop fighting" for justice.
"The military is often the last resort for people who can't find jobs because of discrimination," she said.
The American Civil Liberties Union called Mr Trump's move "outrageous and desperate".
"The thousands of transgender service members serving on the front lines for this country deserve better than a commander-in-chief who rejects their basic humanity," senior staff attorney Joshua Block said.
"Let us be clear. This has been studied extensively, and the consensus is clear: There are no cost or military readiness drawbacks associated with allowing trans people to fight for their country."
Transgender people were allowed to serve openly in the US military for the first time last year under former president Barack Obama, when then defence secretary Ash Carter lifted a ban.
Military chiefs put a stop to new transgender people enlisting in the armed forces, imposing a six-month ban in June 2017 to give them time to review the potential impact.
After Trump's announcement, Twitter users quickly resurfaced a tweet from June 2016, before the election, where Trump vowed to fight for the lesbian, gay, bisexual and transgender community.
