Global markets had surged since November on hopes the president's pledges to overhaul the tax code.
In a severe early blow to the new administration, the healthcare reform was pulled Friday as it failed to garner enough support among Trump's Republican party, who have a majority in both houses of Congress.
While the tycoon said he would now move on to tax reform, the failure of the bill -- which was seen as a litmus test for his ability to push through his economy-boosting agenda -- has led to concern about future policies.
Global markets had surged since November on hopes the president's pledges to overhaul the tax code, ramp up spending and deregulate markets would fire the already healthy economy.
"The selling (on markets) has ramped up... in the wake of Trump's inability to pass his healthcare reforms on Friday," said Joshua Mahony, market analyst at trading group IG.
"The problem for markets is two-fold, with the inability to pass the healthcare reforms meaning any tax cuts will be diminished, while markets are now left wondering whether the President's lack of support in congress will make his tax cuts hard to pass in any form."
Tokyo's Nikkei index led losers, shedding 1.4 percent as the dollar retreated against the yen, while the greenback fell across the board.
"How quickly the White House administration can pivot to and get a convincing message across on tax reform will likely be the major focus early in the week," said Stephen Innes, senior trader at Oanda.
"The markets are desperately seeking any glimmer of optimism that the tax reform agenda can unite Republicans."
On the corporate front Monday, the EU approved a $130-billion (120-billion euros) mega-merger of US agri-chemicals giants Dow Chemical and DuPont, paving the way for major consolidation in a sensitive sector for farmers and the environment.
Elsewhere, ECB data revealed that growth in eurozone banks' lending to businesses slowed in February.
- Key figures around 1030 GMT -
London - FTSE 100: DOWN 0.8 percent at 7,280.63 points
Frankfurt - DAX 30: DOWN 0.8 percent at 11,965.31
Paris - CAC 40: DOWN 0.3 percent at 5,005.32
EURO STOXX 50: DOWN 0.5 percent at 3,428.77
Tokyo - Nikkei 225: DOWN 1.4 percent at 18,985.59 (close)
Hong Kong - Hang Seng: DOWN 0.7 percent at 24,193.70 (close)
Shanghai - Composite: DOWN 0.1 percent at 3,266.96 (close)
New York - Dow: DOWN 0.3 percent at 20,596.72 (close)
Euro/dollar: UP at $1.0857 from $1.0798
Pound/dollar: UP at $1.2568 from $1.2473
Dollar/yen: DOWN at 110.32 yen from 111.34 yen
Oil - Brent North Sea: DOWN 29 cents at $50.51 per barrel
Oil - West Texas Intermediate: DOWN 44 cents at $47.53