China's major expansion control measures on its rare earth minerals appear to be backfiring, as on Thursday Japanese Finance Minister Katsunobu Kato called for the Group of Seven nations to "unite and respond" to China's actions from last week. This after the Trump administration slammed the "global power grab" efforts by China as it seeks to have a "chokehold on the world of rare earth and rare earth materials."

Germany’s finance minister has as a result signaled that a coordinated response from the bloc is likely coming, and Australia’s Prime Minister is expected to hammer out an agreement on critical mineral supply chains during an upcoming trip to Washington. China's 'retaliation' is fast alienating those Beijing thought it could rally to its corner after Trump first unveiled steep tariffs, marking a sharp reversal from the global mood of six months ago.

Bloomberg has referenced the following to illustrate this reversal as follows: "Whether a miscalculation by Beijing — or an opportunistic bid by a superpower eager to police critical supply chains — the showdown taking shape marks a setback for Chinese efforts to build relationships on the world stage. Only weeks earlier, Xi’s show of bonhomie with India’s Narendra Modi sent a message that China could be an alternative partner for nations roiled by Trump’s upending of US foreign policy."

According to the latest Chinese response Thursday, Commerce Minister Wang Wentao has blamed a series of "restrictive measures" by the US after the Madrid trade talks. He made the comments while meeting with and trying to woo Apple CEO Tim Cook into deepened cooperation and increased investment with China.

Simultaneously, Commerce Ministry spokesperson He Yongqian told a press conference: "The U.S.' interpretation seriously distorts and exaggerates China's (rare earths export control) measures, deliberately stirring up unnecessary misunderstanding and panic." A further summary of Beijing's latest response:

• The US approach to this situation is vastly distorting reality.
• The US is holding China to standards that they wouldn’t hold themselves to.
• Decoupling from the US is not a realistic or rational option.

The day prior, US Trade Representative Jamieson Greer issued a firm US stance, saying, "To paraphrase the secretary in one of our recent meetings with the Chinese, this is the last time we want to be talking about rare earths with the Chinese."

Greer continued to Fox Business, "Unfortunately, that is not the last time they want to be talking about it. The reality is, there are a lot of areas where we can trade with the Chinese. Our trade is wildly imbalanced. So it needs to be more balanced. And there is a lot of, as the secretary said, areas of risk." 

China's new rare earths rules, set to take effect later this year, were an obvious shock to foreign governments and companies which now may have to acquire licenses from Beijing which can be denied, even if trading products containing Chinese-sourced materials outside of China.

This is seen also as big shot across the bow to the US defense industry in particular, sending the Pentagon on a new buying spree, as we reported, and sending rare earths stocks vertical this week.

And a Chinese state media take on the back-and-forth accusations...

Analyst and critical minerals expert Gracelin Baskaran of the Center for Strategic and International Studies told CNBC earlier in the week that "What this essentially means is that it will deny licenses to foreign militaries and companies that are producing military use end goods."

"It undermines the development of the defense industrial base at a time when there is rising global tension. It is a very powerful negotiating tactic because it undermines national security," Baskaran added.

While Beijing is essentially saying "two can play" at Trump's tariffs game with its export curbs- again, pieces are now in play which could prove this a massive backfiring and miscalculation resulting in the opposite: China's isolation.