The United Kingdom on Tuesday banned trade with Israeli settlements in the occupied West Bank, where it says "settler terrorists" are carrying out "ethnic cleansing" of Palestinians.
In response, Israel said it would close the British consulate in Jerusalem, the country's foreign minister said Tuesday.
US Secretary of State Marco Rubio said Tuesday the United States will not join Britain-led sanctions on trade with Israeli settlements and that it does not want anything to destabilize the West Bank.
"Obviously, we're not going to do what the UK did," Rubio told journalists of the sanctions before departing on a trip to Latin America, adding: "We don't want to see anything destabilising going on right now in the West Bank with so much going on in the region."
Britain's Foreign Secretary Ed Miliband said the UK will ban imports of all goods from the settlements and bar companies from providing services for the settlements, including financing, construction, infrastructure, real estate and advertising.
He said France and Canada would also ban trade in goods from settlements.
"I do not believe the British people want us supporting the occupation by accepting products from settlements in our shops and supermarkets," Miliband said.
The economic impact is likely to be limited, since the settlements produce only a small amount of largely agricultural exports.
But the move is a symbolic expression of displeasure with Israel by some of its closest allies, and new sign of its growing isolation as a result of the Gaza war.
Miliband said that he feels "a deep sense of shame about what has unfolded in Palestine under the eyes of the international community."
"We will not acquiesce in the destruction of the two-state solution," he said.
In a statement, Israeli Foreign Minister Gideon Sa'ar said Israel would undertake other countermeasures, including expelling UK representatives from a joint military center monitoring the Gaza ceasefire and ending UK training of the Palestinian Authority's security forces in the West Bank.
In addition, Israel will prevent the entry into Israel of 12 elected UK officials, as well as other British citizens Sa'ar said were "involved in antisemitic and anti-Israel activity."
Under the ultranationalist government of Israeli Prime Minister Benjamin Netanyahu, settlement construction in the West Bank - seized by Israel in the 1967 Mideast war - has surged.
Britain and other countries have voiced particular concern about the E1 settlement project approved by Israel, which would effectively cut the territory in two.
Palestinians and rights groups say it could destroy hopes for a future Palestinian state.
There have been marked increases in attacks by settlers on Palestinians, evictions from Palestinian towns, Israeli military operations and checkpoints that choke freedom of movement, as well as several Palestinian attacks on Israelis.
"The British government agrees that there is ethnic cleansing of Palestinians in areas of the West Bank, perpetrated by settler terrorists," Miliband said.
He said there had been "houses bulldozed, roads and public infrastructure destroyed, families displaced from their homes." The ban on trade will be in place in six to nine months, Miliband said.
He said Canada and France will also announce a ban on goods from Israeli settlements, while Denmark, Finland, Iceland, Poland, Portugal and Sweden have pledged to "support further action."
The Netherlands, Ireland, Belgium, Spain and Norway have either banned goods from settlements or are in the process of doing so, he said.
Miliband also tightened Britain's embargo on weapons sales to Israel for use in Gaza to include arms "that materially contribute to the occupation" of Palestinian territories.
The United Kingdom, a longtime ally of Israel, recognised Palestinian statehood last year in an attempt to revive dwindling efforts to achieve a two-state solution.
The center-left Labour Party government has previously sanctioned some Israeli settlers and illegal outposts over violence against Palestinians and illegal development in the West Bank.
In a change of Britain's position, Miliband said on Tuesday that the UK regards Israel's occupation of the West Bank, and not just the settlements, as illegal.
The tougher stance is likely to be welcomed by many Labour voters and lawmakers, who have urged the government to go further in sanctioning Israel and supporting the Palestinians. But some Labour members expressed concern that the sanctions could boost support for Netanyahu, who is facing a tough battle for reelection in October, or lead to attacks on British Jews.
Opposition Conservative Party foreign affairs spokesman Tom Tugendhat said that "turning Israel into a pariah will risk sectarian division in own country and risk a further rise in antisemitic violence on our own streets."
Israeli President Isaac Herzog called the ban "a grave miscalculation, a decision that will fall on the wrong side of history.
"In the current context, it would be a gross interference in the democratic elections of a sovereign nation," he said.
Agencies