THE U.S. STEEL CORPORATION, bruised and angry, finally decided to kick over its fragile truce with the Carter administration. The company has formally charged that seven European countries are dumping steel in the United States. The future of the American steel industry now depends, more explicitly than ever, on public policy.

Since it will take various government agencies until late summer to arrive at their findings, the immediate effect will be more strain between this cuntry and Western Europe. The Europeans will charge that the United States is turning to protectionism. The charge is familiar but, in this instance, it is unfair. The dumping case is being brought under legislation the United States negotiated carefully with its trading partners and, having agreed to the procedure, the Europeans cannot complain when it is used. But this case certainly casts a shadow over the expansion of the trade on which every industrial nation's prosperity depends.

The American steelmakers argue bitterly that their prices are being held down at unprofitable levels by imports that are being subsidized by foreign governments to protect jobs in their own mills. Substantial subsidies are apparent in some of the European shipments. But that is not true of steel from the extremely efficient Japanese mills. Anti-dumping action will only rescue the American producers from their least efficient competitors.

What does the American steel industry really want? It says that it wants prices high enough to enable it to modernize, to install the required pollution controls and to return a profit. The steel makers are beginning to sound as though they think of themselves as public utilities, with franchises and guaranteed rates of return.

Worldwide, the steel industry has built far more capacity than it needs. New mills in the developing countries have severely limited the traditional export markets for American producers. There are many aging and obsolescent steel mills in both this country and Europe. The great question is which of them will be shut down. Or, to put it the other way around, the great question is how much effort governments will expend to keep them open.

It is not the government's responsibility to make all American steel companies profitable. But there is a public interest in maintaining the conditions in which some, if not all, of them can survive, raise capital, invest it, and sharpen their efficiency. For public policy, the challenge is to make that process possible without sheltering companies from the foreign competition that is a necessary pressure on American performance.