The British government's Northern Ireland minister Brandon Lewis on Tuesday said Britain could break international law - in a "limited way" in legislation related to the implementation of its Withdrawal Agreement divorce treaty signed with the EU in January.
"These were really extraordinary comments, and certainly set off alarm bells in Dublin. I think they have backfired," Varadkar told RTE radio.
"Certainly, the strategy and behaviour of the British government was one of brinkmanship, was one of threatening to crash out, you know, if you don't, if we don't get to an agreement we might go kamikaze on you, that sort of thing," Varadkar said.
"The most benign assessment I can give you is that this is brinkmanship that this is sabre rattling," he said.
Varadkar said there could not be a free trade agreement with the EU in "circumstances where the UK government is not honouring the withdrawal agreement", but said he thought Britain ultimately wanted a compromise.
"I think they want a deal," he said. "It would seem that the sticking points are around fisheries, which is going to be a very difficult one, and also around state aids," he said.
"They to me, would not seem insurmountable, and there is time."
Varadkar said that a zero-tariff trade deal with the EU would remove the requirement for some of the controversial changes in legislation the British government has proposed to reduce trade friction between Northern Ireland and the rest of the United Kingdom.
"That could be what they are playing at," he said.
(Reporting by Conor Humphries and Graham Fahy; Editing by Alex Richardson)