Chinese telecommunications giant Huawei will no longer work on a digital radio system for Perth's rail network.
The privately owned company had won a $205 million contract to build and maintain a 4G communications system for Western Australia's Public Transport Authority.
Transport Minister Rita Saffioti ordered a review of the deal after the United States brought criminal charges against Huawei, and the state government was reassured last year that the project could still be delivered.
But on Friday, Ms Saffioti said the radio systems replacement project would not proceed with the HUGL Consortium because further trade restrictions had created a "force majeure event" that could not be overcome.
"It is extremely unfortunate that the state government's project, which is limited to a radio network for train drivers and transit guards, has been caught up in the ongoing trade dispute between the US and China," she said.
The PTA will seek to deliver the project through a new arrangement, without breaching US trade restrictions.
A plan for the PTA to vacate the analogue radio spectrum by May 2020 has been extended to beyond 2021.