OK, let's see if I can rephrase the idea in terms you'll understand.  "Mulatto" is a term invented by Europeans of inherently white-supremacist cultures to refer to those of "mixed blood".  It's of Spanish and/or Portuguese origin: "mulato", literally "young mule," from mulo "mule," from Latin mulus."  If you referred to my children or grandchildren that way, you and I would have words.  At least.

You may not think the latter would find such a term insulting (probably because it would never be applied, with all its ugly baggage, to you), but consider.  Would you accept it if I chose to refer to you as "melanistically-challenged"?  Not only is it accurate (in relative terms), it's fairly "PC".

“O, wad some Power the giftie gie us, To see oursels as others see us!" (Robert Burns).