This Dec 9, 2020, photo shows flags of the Union Jack and the EU ahead of Britain's prime minister's meeting on post Brexit trade deal with European Commission president, in Brussels. (Olivier HOSLET / POOL / AFP)

The European Union warned it could impose tariffs and quotas on the UK as a bitter Brexit dispute over trade with Northern Ireland escalates.

“We are at a crossroads in our relationship,” European Commission Vice President Maros Sefcovic told reporters on Wednesday after talks with UK Brexit Minister David Frost aimed at defusing the crisis. “Patience is wearing very, very thin.”

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While Brussels officials have previously warned in private that the bloc could take retaliatory measures under the terms of Britain’s Brexit deal, European Commission Vice President Maros Sefcovic is the first to make the threat in public and detail the potential reprisals

At issue is Prime Minster Boris Johnson’s effort to backtrack from a legally binding agreement the UK spent years negotiating to secure its orderly withdrawal from the bloc: in a bid to avoid customs checks on the island of Ireland, he agreed to put a trade border in the Irish Sea.

The UK has said it underestimated the disruption its decision would wreak on businesses, and has sought to delay implementing parts of the accord -- something the EU has strongly resisted.

If the UK makes more unilateral changes to the Northern Ireland Protocol, Sefcovic said the bloc could retaliate by suspending cooperation in certain sectors and that quotas and tariffs “could come into play.”

“We hope to avoid it,” Sefcovic said. “It’s not too late. Let’s correct the path, let’s focus on what unites us.”

While Brussels officials have previously warned in private that the bloc could take retaliatory measures under the terms of Britain’s Brexit deal, Sefcovic is the first to make the threat in public and detail the potential reprisals -- a sign of how the dispute risks poisoning relations between the EU and UK less than six months after the two sides struck a zero-tariff, zero-quota trade accord.

A senior UK official close to the negotiations said Britain doesn’t want a trade war, and that the EU should “think hard” before retaliating. The bloc’s “excessively purist” approach is “risky” given Northern Ireland’s history of violence, the official added.

The pound gave up its earlier gains and fell 0.2 percent to US$1.4135.

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“Sterling is under pressure as the tensions between the EU and the UK were put on a full display,” said Valentin Marinov, head of G-10 currency research at Credit Agricole. “The post-Brexit uncertainty is still very much there and could continue to cloud the outlook for the UK services sector.”

Tensions are set to grow in coming days. A grace period allowing traders in the rest of the UK to continue selling certain goods in Northern Ireland is set to expire on June 30. After that, some processed meat products such as sausages will be banned from sale because the EU rules have no provision for certifying that they are safe to eat. The senior British official stated that a unilateral extension is one option being considered by the UK.