The rollback of federal diversity, equity, and inclusion (DEI) initiatives under former President Trump is expected to significantly impact small businesses across the country.

In a wave of executive orders issued during his first week back in office in late January, Trump dismantled all federal DEI and affirmative action programs, as well as grants, contracts, and prior executive orders related to equity. 

The orders include titles such as “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” “Ending Radical and Wasteful Government DEI Programs and Preferencing,” and “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government.”

In a media briefing on March 7, hosted by Ethnic Media Services, a panel of experts discussed the impacts of the ending of DEI programs on small businesses. 

Speakers

  • Dilawar Syed, former deputy administrator of the Small Business Administration SBA
  • Dr. Esther Zeledon, founder of BeActChange, a small business affected by the policy changes
  • Thomas A. Saenz, President and General Counsel of MALDEF, Mexican American Legal Defense and Education Fund
  • Elizabeth Barrutia, President & CEO, Barú, an independent and woman owned agency dedicated to elevating multicultural marketing and media

Small businesses make up a vast majority of the U.S. economy—numbering 33.2 million and accounting for 99.9% of all businesses. Of these, over 40% are owned by women, nearly a quarter by immigrants, and around 20% by racial minorities, with Latinos representing a large portion of that demographic.

“The attack on so-called DEI is really an attack on American entrepreneurship, and this is just the start,” said Dilawar Syed. “The rollback of federal diversity, equity, and inclusion (DEI) initiatives under former President Trump is expected to significantly impact small businesses across the country.”

These executive actions came alongside a January 27 freeze on hundreds of billions of dollars in federal program funding. In February, under the newly established Department of Governmental Efficiency—led by Elon Musk—federal agencies saw mass layoffs, including a 20% reduction in SBA staff, totaling around 720 employees.

“We all want to see better efficiency, but this approach of laying off 20% of the workforce — many of whom are people providing customer service — without even stepping a foot in these agencies, is just inefficient,” Syed noted. “Now you have even longer wait times to get help.  It would affect every single American who wants to start or grow a business.”

On top of staffing cuts, SBA Administrator Kelly Loeffler announced last Thursday that offices in six major cities, including Chicago, Denver, and New Orleans, would be shuttered due to their sanctuary city status.

“That doesn’t help us serve this unmet need of a rising class of entrepreneurs of color,” Syed added. “American economic competitiveness in the world is directly tied to immigrants pursuing their dreams.”

In fact, as of 2024, nearly half (46%) of Fortune 500 companies—230 in total—were founded by immigrants or their children.

“We have to uphold our country’s laws, but we’re not talking about reforming proper legal pathways for people to become productive citizens,” Syed continued. “All we’re doing is choking a very important source of labor in this country by demonizing immigrants.”

The SBA’s diversity quota for federal contracts has also been reduced from 15% to 5%, adding to the difficulty small businesses face in securing approvals—often essential for competing in federal contracting.

Elizabeth Barrutia said the rollback threatens her ability to even participate. “I’m concerned that the very programs we were bidding on will be eliminated now,” she said.

She also pointed to broader ripple effects: “There’s a trickle-down effect into the whole media landscape I work with. When minority outlets — print, broadcast, television — are getting less dollars to market government programs like health, education or financial aid services … there will be long-term disproportionate outcomes for health equity, educational attainment and financial attainment.”

“Innovation will falter, and innovation is what generates more dollars,” Barrutia warned. “Years ago, they would say multicultural marketing is good for business. Now I’m wondering whether they understood it was a business imperative to begin with.”

Multicultural consumer spending in the U.S. has surged from $458 billion in 1990 to $3.2 trillion in 2021. In 2023 alone, multicultural media spending increased by 5.7%, reaching $34.64 billion—representing 5.3% of total U.S. advertising expenditures.

“These efforts under the banner of DEI rose up in order to stop discrimination that was ongoing and widespread in favor of white men … and to ensure that that discrimination is replaced by policies that ensure that people of color and women receive a fair shake in competing for employment or contracts,” said Thomas A. Saenz. 

“This administration’s attack on DEI is about making it easier for those who are inclined to engage in that discrimination in favor of white men, and intimidate those who are interested in taking steps to end that discrimination.”

Dr. Esther Zeledon shared her personal experience with the fallout. “We’re creating this scarcity mindset of ‘If I give other people opportunities, then you’re taking away from me,’” she said. “In my own case, I lost 95% of my contracts across sectors, from human rights to climate science … I have a PhD in environmental science from Berkeley, and people no longer trust my work.”

“The language of the executive orders — that all DEI efforts are wasteful and radical — politicizes and puts mistrust onto people who have benefited from those programs,” she added. “It’s not just changing a policy, it’s saying that we don’t have any wrong to correct.”

According to Zeledon, this is a direct assault on social mobility. “It’s an economic attack on all of us who are seeing a rise in oligarchy in our leadership,” she said. “We need to open doors for each other if we want to help America be stronger, better, more prosperous.”

 

Images provided by Ethnic Media Services.