The two countries severed their friendly relations.

Literal

Both-countries [topic-は] friendly-relations [object-を] cut-off.

友好関係を打ち切る (to sever friendly relations) combines 友好関係 (friendly relations) with 打ち切る (to cut off/terminate). 打ち切る is more decisive than やめる — it implies a deliberate, final break.