In an interview published by Politico on Friday, Ms Haley, 49, who served in Mr Trump's cabinet between 2017 to 2018, said: “We need to acknowledge he let us down."
She added: "He went down a path he shouldn’t have, and we shouldn’t have followed him, and we shouldn’t have listened to him. And we can’t let that ever happen again.”
The comments from Ms Haley, who campaigned in person for Mr Trump during the 2020 presidential election and at the Republican National Convention, are her strongest yet about the former president.
She recently warned Republicans to not “shy away” from the party’s achievements during the Trump administration, but made sure to distance herself from his conduct in recent weeks, as he made numerous false claims about widespread fraud in 3 November's election and later incited the Capitol riots.
“His actions since Election Day will be judged harshly by history,” Ms Haley said last month according to excerpts from a speech seen by Fox News, before adding later in the month in a widely mocked interview: “Give the man a break!”
Ms Haley's interview with Politico was published on the fourth day of Mr Trump's second Senate trial, which he is facing after being impeached for inciting the Capitol riots at a "Save America" rally outside of the White House on 6 January.
Five people died and several more were injured in the insurrection. A week later, and a week before leaving office, Mr Trump was impeached by the House.
Ms Haley confirmed to Politico on Friday that she has not spoken to Mr Trump since the riots, and expressed her disappointment with remarks he made about his vice-president Mike Pence, where he criticised him for not overturning the election results.
“When I tell you I’m angry, it’s an understatement,” she said. “I am so disappointed in the fact that [despite] the loyalty and friendship he had with Mike Pence, that he would do that to him. Like, I’m disgusted by it,” she added.
The former ambassador also revealed to Politico that she spoke to Mr Trump in a phone call in mid-December, and claimed that he believes his baseless claims about widespread fraud in last year's presidential election.
“I understand the president. I understand that genuinely, to his core, he believes he was wronged,” Ms Haley said. “This is not him making it up,” she added.
However, she confirmed that she did not try to persuade Mr Trump that he had legitimately lost the election, saying that: “When he was talking about that, I didn’t address it.”
Social media users reacted to Ms Haley's comments on Friday morning, with many claiming it was "too late" for her to turn on the former president.
Twitter user @TracyHankins7 wrote: "Too little too late. She’s as manipulative as the rest of them...she has end game...they always do."
User @LaurenDownSouth tweeted: "Someone tell her it is too late. She stayed on the trump train until after it crashed," while @jasmeel added: "Haley trying to redeem herself this week."
Last month, the 49-year-old launched a political action committee (PAC) to support conservative candidates, amid speculation that she will run for president in 2024.
The committee, named the Stand for America PAC, has been formed to help conservative candidates get elected to Congress in the 2022 midterm elections.
A news release said that the PAC will support candidates who “defend America’s founding principles: freedom; opportunity for all; free speech; limited government; capitalism; the rule of law; and a strong national defence”.
Bradley Crate, who previously acted as treasurer for Mr Trump's 2016 presidential campaign, will take on the same role for the PAC.
Although Ms Haley, who also served as the governor of South Carolina from 2011 to 2017, has not confirmed whether she will run for president in 2024, analysts are predicting that the PAC will help raise her profile ahead of a rumoured presidential campaign.
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