US President Donald Trump slammed Elon Musk after he formed a new political party, terming the move as "ridiculous" and saying the tech billionaire has gone "completely off the rails".

Musk, Trump`s one-time ally, said in a post on X Saturday that he had set up the "American Party" to compete against the Republican and Democratic parties.

"I think it`s ridiculous to start a third party," said Trump, speaking to reporters on Sunday before boarding Air Force One. "It`s always been a two-party system, and I think starting a third party just adds to the confusion."