The European Community may suffer major political and economic damage by refusing to compromise in world trade talks over U.S. proposals for deep cuts in farm subsidies, Agriculture Secretary Clayton Yeutter said Tuesday. If it comes to an agricultural trade war with the EC, said Yeutter, the United States is prepared to fight. Negotiations among 107 nations in the so-called Uruguay Round of trade talks collapsed Dec. 7 in Brussels after the EC refused to bend on U.S. proposals on major farm trade issues, including cutbacks in internal price supports and export subsidies. The United States, backed by Australia, Brazil and other major exporters, sought sharp reductions in subsidies, while the 12-nation EC, Japan and Korea were against the plan. Efforts are being made to reconvene the talks in mid-January, but Yeutter said further negotiations would have little chance unless the EC is prepared to change its hard-line stance. But Yeutter told reporters he thinks some internal pressures are developing in favor of a reassessment of the EC position. Yeutter said he was Europe last week in the aftermath of the Dec. 7 breakdown and found the community to be ``very embarrassed by what happened in Brussels.'' The community ``will probably not concede that publicly, but the fact is they suffered a major geopolitical defeat in Brussels, with essentially all of the world leaving with dissatisfaction and disappointment in the EC position,'' he said. ``A lot of folks in Western Europe are chagrined by the present status of the Uruguay Round and are concerned that the (EC) may bear the lion's share of the blame for failure, should it occur,'' Yeutter said. Consequently, he said, a number of ``working level'' people in the EC are trying to reassess the bloc's position in hopes the stalled talks can be rejuvenated. But Yeutter said he didn't know at this point whether this can translate into changes at the EC's leadership level. ``I'm pessimistic about the potential outcome (of the talks) so long as the community maintains its present intransigent stance,'' he said. Earlier, in a telephone news conference with broadcasters, Yeutter he was not ready to tip off the EC what the United States might do if the Uruguay Round of talks fail completely. But Yeutter predicted that the EC potentially could be forced into spending all its allotted funds in 1991 trying to maintain high supports and export subsidies to keep pace with the United States. Of course, he said, the EC then could replenish its coffers but ``they would have to make a conscious decision'' to spend more on agriculture than they do now. ``We'll be spending more money, too, of course, and we'll have to find the financial resources to do that, and a lot of other countries will, as well,'' he said. Yeutter also hinted at other possible U.S. trade actions in case the trade talks fail but declined to be specific. ``I want them to be uncertain about what our response would be - and a bit frightened by the potential,'' he said. ``So, I'm not going to discuss publicly what the United States might do.''