Senior EU figures have threatened a strong response to the UK's legislation.
German Chancellor Olaf Scholz yesterday hinted at trade measures against the UK, while the EU's chief negotiator, Maroš Šefčovič, said the European Commission could resume legal action against London.
Mr Šefčovič will brief members of the European Parliament later today.
Last night, one senior EU figure after another denounced the UK bill that would tear up the protocol.
Mr Scholz said the EU had its entire toolbox at its disposal, in other words, the EU could take retaliatory trade measures.
Senior Italian, Dutch and Austrian ministers all accused the UK of threatening to break international law.
The European Commission waited until the bill was laid before the House of Commons before responding.
Mr Šefčovič said the EU would not renegotiate the protocol.
It is understood the European Commission could unfreeze legal action against the UK that was launched in March of last year, but then suspended in July to give time and space to negotiations on implementing the Protocol.
That could happen as soon as tomorrow and the commission could add new infringement proceedings as well.
This could end up with the UK being taken to the European Court of Justice, but Mr Šefčovič also made it clear that trade measures were an option against the UK.
The commission will further outline its response tomorrow, while Mr Šefčovič will today meet the UK Contact Group of MEPs in the European Parliament.
While the EU was anticipating a bill that would disapply parts of the protocol, one diplomat said member states were stunned by the scope of the legislation.
EU Commissioner Mairead McGuinness said the latest action taken by the British government on the Northern Ireland Protocol is "aggressive", "much worse than anticipated" and is threatening the EU-UK working relationship.
She said the question she is now asking after yesterday, is: "What will happen next?"
Speaking on Prime Time, she said the EU never left the table and has insisted only dialogue will solve issues over the NI protocol, not legal action.
"We are still at the table waiting for the UK to negotiate."
Ms McGuinness said the UK wants to write its own protocol and within that Northern Ireland is "neglected".
"Businesses in Northern Ireland were gaining from the protocol and we have to allow that continue," she said.
She said trust needs to be rebuilt as she highlighted the length of time this issue has prolonged for.
"We are six years from a referendum that should have been settled at this stage," she said.
Ms McGuinness said details of the EU plan on solving NI protocol issues last October resulted in "no real engagement" from the UK and there is a sense in the EU that it was not taken seriously.
She lso accused the British government of not paying any attention to Northern Ireland at the time of the Brexit referendum and said it was Ireland that raised concerns for Northern Ireland if the referendum was passed.
"And now we see the impacts," she added.
Business leaders sound note of caution
UK business leaders have urged British Prime Minister Boris Johnson not to enter a "damaging trade war" with the EU.
Mr Johnson insisted the bill contained only minor, bureaucratic changes, while Downing Street said it was an "insurance mechanism" in case a negotiated agreement with the EU could not be found.
However, Stephen Phipson, chief executive of Make UK, the manufacturers' organisation, said business needed both sides to urgently get round the negotiating table to agree a "pragmatic" settlement.
"We recognise that the protocol in the current state does need to be changed," he said.
"But the way to do this is not to start a trade war with the EU in the middle of a financial crisis which would be damaging for both British and EU businesses alike and put further strain on already stretched supply chains."
Richard Burge, chief executive of the London Chamber of Commerce and Industry, said the government's action risked "significant harm" to businesses across the UK.
"Getting Brexit done was at least meant to deliver certainty to businesses after years of waiting for clarity on the future of the UK's trade relations with the European Union," he said.
"The introduction of this bill means we are now teetering on the brink of a trade war with the EU and that will mean further economic pain and falls in investment."
Despite the warnings, any confrontation is likely to be some way off.
The British government faces significant opposition to its plans in the House of Lords and it is likely to be some months before the legislation becomes law.
Additional reporting: PA
