Nicholas and Steve have open Trade Agreements with each other.
When two players become involved in an open war, any Trade Agreements they have become null and void. The Trade Agreements are considered broken. Each player must return their Trade Contract cards with each other. The cards are placed in the original owners player's area face-down.
Nicholas just initiated a Space Battle with Steve, so the Trade Agreements are terminated.
Breaking of Trade Agreements happen automatically in open war. An open war happens when one player initates s Space Battle or Planetary Invasion Combat with another player. Note that playing Action Cards against each other does not violate an active trade Agreement between players. Firing PDS upon each other is also not considered an act of open war.
Of course, a player can break a Trade Agreement for any reason if they choose during the normal Status Phase of a round.