Trump had asked Otero to dismiss the lawsuit.
Mr Trump has denied any relationship with the actress.
The judge said that Trump and his team have 14 days to file a motion to seek said fees.
"In making the statement, Mr. Trump used his national and worldwide audience of millions of people to make a false factual statement to denigrate and attack Ms. Clifford", stated the original April 30 defamation filing in New York Supreme Court by Daniels lawyer Michael Avenatti after Trump let off on social media.
Daniels, whose real name is Stephanie Clifford, sued Trump in April after he described her allegations of being threatened by a unidentified man in 2011 as a "a total con job".
"No amount of spin or commentary by Stormy Daniels or her lawyer, Mr. Avenatti, can truthfully characterize today's ruling in any way other than total victory for President Trump and total defeat for Stormy Daniels", said Trump counsel Charles Harder in an emailed statement.
"Daniels' other claims against Trump and Cohen proceed unaffected".
"The Court agrees with Mr Trump's argument because the tweet in question constitutes "rhetorical hyperbole" normally associated with politics and public discourse in the United States", Otero wrote in his ruling.
A federal judge on Monday dismissed a defamation lawsuit filed by porn star Stormy Daniels against President Donald Trump and ordered the woman to pay the president's legal fees.
Ms Daniels, who in August pulled out of an appearance on Celebrity Big Brother following a row with producers, alleges she was paid to remain silent over claims of an affair with Mr Trump.
"Trump's contrary claims are as deceptive as his claims about the inauguration attendance", Avenatti tweeted Monday night.
The lawyer explained that Daniels had looked at photos of a number of individuals "we believe indirectly" worked for Trump and Cohen, Avenatti said. Cohen had threatened to sue her for $20 million. But now, Daniels, an adult film actress and director, says people think she's "in charge of saving the world", and it's become an "emotionally overwhelming" duty.