The Democrat called the move "political retribution" for California's legal challenges to the administration's immigration policies, and said the state won't sit "idly by" in the face of the withdrawal of funds. The administration also wants to reclaim another $2.5 billion in federal funds already spent by California on the project.
Originally, the rail line was supposed to connect Los Angeles and San Francisco.
Newsom responded, tweeting that the state would not give back any money and that the president is just "desperately searching for" money for the border wall.
The Federal Railroad Administration announced on February 19 that it meant to cancel $929m of federal grant destined for the high speed rail project in California.
Newsom administration officials last week said they are working on a "project update" report to be published some time this spring, and are expected to include a new financial analysis.
Newsom told lawmakers that the state will finish a 119-mile high-speed rail link between Merced and Bakersfield in the state's Central Valley, which was met with derision on social media.
Newsom vowed to block the move, arguing that it was political payback by the Trump administration. Because they are no longer able to claim more than $10,000 under the SALT deduction, it made more financial sense for California's rich to hold onto their money and earn interest until the April 15 filing deadline rather than paying the tax during 2018, as usual.
The letter specifically cited Newsom's announcement, saying that decision to significantly scale down the project "frustrates the objective for which Federal funding was awarded".
Money, of course, remains the overarching issue with the project, with the price tag for a statewide train system closing in on $100 billion. The Governor acknowledged last week that the High Speed Rail project is over-budget, lacks transparency and can not be completed as originally told to voters in 2008.
"The thinking now seems to be, 'we really blew it, but what the hell are we going to do with this thing?'" Mr. Hanson said.
The government is also looking to collect on some of Californa's unpaid bills from the project.
Newsom declared in his first State of the State address last week that he planned to scale back the project and focus immediately on building 171 miles (275 kilometers) of track in central California.
The "bullet train" project, which Newsom now says probably won't be completed, has cost the state and federal government an astounding $77 billion - more than 12 times what Trump requested from Congress to fund border wall construction in key areas.
He said he agrees with the governor and Guardino that California should not have to pay back the $2.5 billion; that the money took a one-way ticket to California and not a round trip back to Washington D.C.
The grant agreement between California and the federal government, signed in 2010, outlines several scenarios in which the federal government could take the money back.
Assemblyman Jim Patterson, R-Fresno, a vocal critic of the project, said, "It doesn't matter what the state says about not giving the money back", he said.
As the Associated Press reports, the $929 million that Trump is threatening to cancel was approved by Congress almost a decade ago.