Heather Nauert was chosen by the president to represent America at the UN last year despite having no diplomatic or foreign policy experience.
The 49-year-old said in a statement on Saturday she would not take up the post because it had been “too gruelling” for her family.
Mr Trump had not formally submitted her name to the Senate for approval and the confirmation process was expected to have been tricky to navigate, given Ms Nauert’s apparent lack of qualifications for the senior diplomatic post.
However, it has emerged another factor in play could be her Jamaican nanny.
Multiple news outlets in the US have reported the nanny, although living in America legally, did not have the right work visa while she was employed by the Nauerts.
The Washington Post said the nanny – who worked for the family more than 10 years ago – was also paid in cash, and did not at first declare the income to the tax authorities.
Ms Nauert has not yet commented on these allegations.
When the former Fox News reporter was first chosen by Mr Trump to replace his departing ambassador Nikki Haley – the former governor of South Carolina – there was widespread surprise.
Ms Nauert had been working as a spokesperson for the State Department since April 2017.
Prior to that appointment, she was a correspondent on Fox and Friends, a show beloved of Mr Trump.
An anonymous senior official at the department insisted she had developed foreign policy experience since joining the government, telling The Washington Post she had now “visited 26 countries”.
After first rising to prominence as a pundit during the Monica Lewinsky scandal, Ms Nauert has since held a number of roles at Fox News, mostly espousing the standard conservative position on policy issues.
Critics have pointed to episodes where she spread conspiracy theories on the 2012 Benghazi attacks, denigrated undocumented immigrants as “illegals” who spread disease, and warned against supposed sharia law spreading across America.
She hit the headlines again in June last year when she cited the D-Day Normandy landings as an example of America and Germany’s “strong history”.
A statement from the State Department said Mr Trump would select a new UN ambassador soon.
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