The inaugural Concacaf Nations League kicked off earlier this month, as every country in the region takes part in a competition designed to replace most international friendlies.
Though the competition is likely to benefit some of the smaller teams in Concacaf by providing more consistent meaningful games, Klinsmann is concerned that it will damage the region's top teams.
"I think the biggest challenge for the United States, or even Mexico or Costa Rica, for the key countries in this region, is you don't really have the highest competition outside," Klinsmann told ESPN.
"That means when you play just within your own system, you don't have the big matches against European countries or South American countries in order to grow your program, in order to grow your players.
"So literally when you are kind of locked into Concacaf and you don't play Argentina, Brazil, Colombia and Chile every year, or you don't play Holland, Germany, England, Spain, Italy every year, you have no chance to grow."
Klinsmann advocated for tougher friendly opponents during his spell in charge of the USMNT, which ended in 2016 after back-to-back World Cup qualifying losses to Mexico and Costa Rica.
Under the former Germany striker, the USMNT scheduled matches against high-quality opponents such as the Netherlands, Italy, England, Brazil and Germany in friendlies.
The new competition will limit the amount of friendlies that Concacaf teams play outside their region, which Klinsmann feels will handicap teams like the U.S. and Mexico.
"It's a waste of time, I'm telling you," Klinsmann insisted. "It's a waste of time because you that need [that competition] as a country.
"I mean talking about Mexico, everyone is hoping for the fifth game in the World Cup. You're not reaching that fifth game in the World Cup if you play the teams you are playing now in the Nations League in Concacaf. You are not."
The USMNT kicks off Nations League play next week with games against Canada and Cuba.