Europe's STOXX 600 fell 0.3 percent, with Germany's trade-sensitive DAX down 0.4 percent. Autos and mining sectors, among the most dependent on smooth global trade, fell the furthest, down 1 to 1.2 percent.
The leading euro zone stocks index fell 0.4 percent, breaking its longest winning streak since 1997.
"There's potential for this to be a relatively protracted period of uncertainty given that it seems unlikely you're going to come to a quick conclusion where both sides are happy," said Mike Bell, global market strategist at JP Morgan Asset Management.
Carmakers Volkswagen, Daimler, BMW , and car parts maker Valeo were the top fallers on the DAX and the CAC 40 respectively.
Dealmaking drove the greatest moves across sectors, with Europe's biggest pay-TV group Sky soaring after Comcast's offer won an auction for the company.
Sky shares jumped 8.6 percent to 17.23 pounds, just below Comcast's cash offer of 17.28 pounds a share.
"Sky's importance in the UK remains and with Comcast likely to dictate the strategy going forwards we would expect a continued focus on telecoms, broadband and mobile," Macquarie analysts said.
Randgold Resources topped the STOXX with a 4.4 percent gain after it agreed a share-for-share merger with Canada's Barrick Gold in a deal worth $18.3 billion.
"Perhaps this signals the start of renewed consolidation in the space," said Paul Gait, senior research analyst at Bernstein.
"Clearly Barrick want the management of Randgold and the 'premium' that could be attached to someone like (Rangold CEO) Mark Bristow."
British travel operator Thomas Cook Group sank 25 percent after slashing its profit outlook, blaming a hot summer in northern Europe for weaker holiday demand in the late August-September season.
Thomas Cook peer TUI fell 3.3 percent.
Shares in Danish medical equipment firm Coloplast fell 2.6 percent after Berenberg analysts cut their recommendation on the stock to "sell".
Oil and gas stocks supported the market, up 0.9 percent as crude prices rose 2 percent on US sanctions restricting Iranian crude exports and tightening global supply, while some traders forecast crude to spike to $100 a barrel.
Oil firms Saipem and OMV were among top European gainers, up 4 percent and 3.3 percent respectively.