Urging him to do so, former Conservative Party leader Sir Iain Duncan Smith said the suggestion was “nonsensical rubbish” amounting to “control by another method”.
He said: “It’s simply an attempt by the EU to continue it’s control of its single market by locking the UK out if it fails to abide by their rules.
“We simply cannot do it. We should plough on and simply say, ‘If you carry on like this then you won’t get a deal.’”
Sir Iain urged UK negotiators to reject the plan outright and “be clear that in a matter of days it’s over”.
He said it was time to issue the EU team with an ultimatum: “Either you decide you want a trade agreement or you don’t.”
Mr Frost has played down the “compromise” suggestion, saying: “I want to be clear that the government will not agree to ideas like the one currently circulating giving the EU a new right to retaliate with tariffs if we chose to make laws suiting our interests.
“We could not leave ourselves open to such unforeseeable economic risk.”
Despite his protestations, Brussels is still expected to push the proposal this week.
Meanwhile, former prime minister Tony Blair claimed that EU sources had told him they are preparing for a no-deal outcome.
He told The Sunday Times: “I think it’s the most likely thing now. The information I have from the European side certainly is that they’re expecting this now.
“They assume it is actually what the Government would prefer.”