The Trump administration’s move to gut an agency that aims to support minority-owned businesses has alarmed Democratic lawmakers and nonprofits, who say the action could harm job growth and businesses that rely on the agency’s services.
President Trump signed an executive order last month that would effectively dismantle seven agencies “to the maximum extent consistent with applicable law,” including the Minority Business Development Agency. Housed in the Commerce Department, the agency funds more than three dozen centers across the country that provide technical assistance to minority-owned businesses with the goal of helping them secure loans and contracts.
Nearly all of the agency’s roughly 70 workers were placed on administrative leave late last month, and only three employees remain, according to a person familiar with the matter.
Democratic lawmakers have condemned the Trump administration’s actions. Senator Tammy Baldwin of Wisconsin urged the administration last week to immediately release details on its proposed cuts for the agency and how they could affect small business owners. In a letter to Commerce Secretary Howard Lutnick last week, Senators Maria Cantwell of Washington and Lisa Blunt Rochester of Delaware said that a major reduction of the agency’s work force would be “to the detriment of the U.S. economy” and have devastating effects on its ability to “carry out its programs and duties as mandated by Congress.”
In the past fiscal year, the Minority Business Development Agency helped businesses gain access to more than $1.5 billion in capital and create or retain about 23,000 jobs, according to the agency’s annual report.
Other proponents of the agency said its gutting could hurt minority-owned businesses that already face additional barriers to capital because of a lack of capacity, expertise or an expansive network, among other things.
“Its demise is troubling,” said Marc H. Morial, the president and chief executive officer of the National Urban League. “These businesses now, in order to find these services elsewhere, will either have to pay for them or go without them.”
White House and Commerce Department officials did not respond to requests for comment.
The agency’s creation dates back to 1969, when President Richard M. Nixon established it as the Office of Minority Business Enterprise. The agency, which received about $70 million in funding last year, was later made permanent and expanded by a bipartisan infrastructure bill that President Joseph R. Biden Jr. signed into law in 2021. At the time, Biden administration officials said the move would help “level the playing field” and promote the growth and competitiveness of minority-owned businesses.
Its dismantling is part of the Trump administration’s aggressive attempt to eradicate efforts related to diversity, equity and inclusion, which the president has called necessary to “forge a society that is colorblind and merit-based.”
The Minority Business Development Agency was at the center of a case last year that resulted in a federal judge in Texas ruling that it must offer its services to people of all races and ethnic groups. The agency’s presumption that businesses owned by Black, Latino and other racial minority groups were disadvantaged had violated the Constitution, the judge ruled. The decision came after three white business owners had sued the agency.
Some fiscal conservatives said they supported shuttering the agency, although they believed the changes should be approved by lawmakers.
“Congress should legislate to close the agency down,” said Chris Edwards, an economist at the libertarian Cato Institute. “Employees should be treated fairly, and maybe the agency should be phased out over a period of two or three years.”
Mr. Edwards said he thought it would be “more appropriate” for state and local governments instead of the federal government to provide assistance and take deregulatory actions to support businesses.
Some recipients of the agency’s grants said they were concerned about how the Trump administration’s actions could affect their operations. Lamar Heystek, the president of ASIAN Inc., a nonprofit that operates one of the agency’s business centers in San Jose, Calif., said he expected federal officials to try to cut off the organization’s funding. Mr. Heystek said the federal funds had helped his organization assist thousands of firms in developing business plans, gaining financing with banks and landing contracts with the public and private sectors.
If Trump administration officials tried to disrupt the nonprofit’s federal funding, it would most likely have to reduce the number of staff members providing technical assistance, which would result in fewer businesses being served, Mr. Heystek said.
“The executive order is a reckless assault on the economic progress of all Americans,” Mr. Heystek said in an email. “In the president’s obsessive drive to inflict trauma on the federal bureaucracy, ultimately the trauma will be felt by all of us on Main Streets from Arizona to Wisconsin.”