Is it normal that everyone assumes I'm racist?

All words are made up.

Caucasian (Caucasoid), Mongoloid and Negroid are 3 distinct categories used to differentiate humans by some anthropologists. They're very broad (and contentious) categories and as such aren't usually specific enough to be useful. The differentiation is based upon general physical characteristics - bone structure, hair, skin etc. These differences are a consequence of humans dispersing across the Earth and adapting through successive generations in distinct ways.

In terms of casual use, caucasian is often used to refer to people with white European appearance.