Yah, my kids are literal too. Today I said, "Oh, here's your pony." They said, "THAT is a HORSE, mama. NOT a pony" (They were right too.)
We have a pretty interesting household. My husband is part Japanese and is pretty dark. My dad is Georgian and most folks can't figure out what my ancestral lineage is...just that my features aren't typical for an (N. American) white gal, but my coloring is. My niece is fair, green eyes, blond hair and is a descendant of Italian, E. European, and W. European ancestors. My daughter is darker than I am, and her features are my own.
My daughter is the proud owner of one, "Orange Baby". My niece has, "Pink Baby". They're right, too. Their dolls are one shade each of pink and orange.
Our skin, unlike a dolls, are comprised of many, many different hues. Just from a painter's perspective, if I'm doing skin tones I am NOT using a prefab "caucasian skin tone 43" and spreading it evenly over the body. I'm using a combination of Ultramarine blue, vermilion red, yellow ocher and titanium (or when I didn't have kids) flake white. I'm adjusting throughout the face and body. Some areas are going to be more blue, more yellow, more red. Some people are going to be more blue, more yellow, more red. I'm a pretty red pallet.
My kids want words to be exact. I want color words to be exact too. (((I can let the rest slide, but creating a pallet is one of my few skills. I can match and mix paint really, really well. It drives me CRAZY when people say, that's a blue bike. No. The bike is not blue. It's green. It's a combination of pthalo blue and hansa yellow, with a DASH of zinc white. That's green. It's against a darn yellow wall, and that's shifting the color towards the blue spectrum because of relative color theory.)))
ANY way.
I have these sort of conversations with my kids. "You are ABSOLUTELY right. This is a pony. Did you know a pony is just a horse that measures 14 hands and under? It's a small horse. With a thicker coat. YOUR ponies are usually colored pink or blue. Unless we painted a pony, it wouldn't really be that color. But nonetheless, a pink pony is ALSO a small painted horse."
When my children's race come into it, "Yup. You are right Cicia. You are peach colored. Folks call that "white" here. White is a word that means a few different things. White means, the color white (hold up piece of paper). That's how we've learnt it, right? White also can also be a name for folks with peach colored skin, or when a person's family has peach colored skin, or about where their grandparent's grandparent's grandparent's are from. Opal's skin IS more brown than yours. Cicia's skin is more light than yours, Opal. Luka's great grandparents come from a part of the world where folks USUALLY are a little or a lot darker than Nana is, for example. Cicia's come from a place where folk's skin is usually a lot lighter than Papa A.'s."
We haven't talked much about racism, marginalization, or oppression, because it hasn't been relative to their developmental stage yet. My kids SEE the way folks look. They don't see race, nor do they yet see inequities and oppression. They are learning to treat everyone with respect and value, to share, to play with "new kid friends they don't know yet". They still notice similarities and differences. My niece on the bus will say, "That babies hair is like Opal's, it's curly. Mine is strait." "Yup," I say, "Some folks have curly hair, some strait, and wavy. That baby's hair looks a lot like Opal's."
My Daughter's great grandfather on my husband's side was put into the Japanese American internment camps. He and his wife, my husband's grandmother, were not allowed to marry in her families Mormon church because it was an interracial marriage. They are 93, still married, and have 5 living children and more great grandbabies than I can keep count of.
My children WILL know this story, but they don't yet. They won't get it, because it's not something they can see and touch. Right now they get fables. We tell stories about little bear (my daughter's character) and little panda (my niece's character). They are analogies about the bigger picture, but they are digested more easily than explanations and the history of expansive systems and structures. I tell them their own histories too, but only a few generations back. They don't know about my Dad's people, exiled from their country, nor my mom's people, who Holland during world war 2. They don't hear about famine, war, or genocide, or the insidious racism that touches our lives and is sometimes hard to name. They just wouldn't get it, because they are too little.
They DO get, that person wasn't being a good friend. Or, that person was acting super mean. Or, that person was pretty rude to the other friend and sharing is important and we all look different and we all deserve to be treated respectfully.
Just one more note out of me. My kids get really, really attached to certain colors. Right now, Cicia is into Purple. If I were to say, you are purple, she'd be thrilled. If I were to say she was orange...all S. would hit the fan. While racism still does exist, and it's entirely possible your son might be exhibiting symptoms of having been marginalized by, culture, language (and associations), his day care, etc, it's also possible that he might not like the *color* black and doesn't want to identify with a word that, to him, still is associated with a hue, rather than an identity, a history and sense of cultural heritage and pride.
Hope this wasn't too long winded!