The directive gives the Department of Defense six months to develop an implementation plan that will go into effect on March 23, 2018.
The overall basis for the president's directive was "national security considerations," the official said.
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Those concerns included military readiness, effectiveness, lethality, unit cohesion and budget constraints.
The memo comes one month after Trump said he would not permit transgender individuals from serving, tweeting "the 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."
The Obama administration in June 2016 had changed longstanding policy, declaring that troops could serve openly as transgender individuals. And it set a July 2017 deadline for determining whether transgender people could be allowed to enter the military. Defense Secretary Jim Mattis delayed that to Jan. 1, 2018.
As for transgender individuals currently serving, the Pentagon will have six months to formulate a policy for how to handle their service.
A White House official who briefed reporters on the presidential order would not say whether Trump would permit any exceptions
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The Associated Press contributed to this post.