I think it would be interesting if cultures could have some kind of state tolerance level and race being being a modifier to that tolerance based on certain nations views.
So in the US they'd group a lot more european people into white over time. In europe their racial views would be balkanized for europeans people with some preferences and general for non white people. Then in other countries they'd have some similar suites. China would balkanize it's own ethnicities but see outsiders as 'one race'.
The underlying ethnicities would still be there but the state view on groupings of ethnicities would very historically often making the views towards the out groups similar.
Some political parties (if readded) should have laws or racial views attached to them so if they come into power they'll implement them. This goes from less racist views all the way to 'only my ethnicity matters'.
Having said that I would be careful giving any bonuses to being racist beyond easily impoverishing certain groups (is that even desirable in vicky3?). Race should play a large role in pops motivations rather than governments. There are a number of genocides in this era but I think they shouldn't be gamified if ever represented.
Aside:
I know paradox does not depict genocide in its games and treads VERY carefully but I think tasteful representation would be even better and more historic. I would be very keen on an event explaining some of the anti native america policies in the americas (reserves, residential schools, killing the buffalo to starve the plains natives). These events should explain the circumstance neutrally, explain the tragedy, and give no gameplay bonuses and happen without player intervention and largely serve to educate players of some of the tragedies of history. The only real gameplay effect would be the removal of some pops. The same I think should apply to the armenian genocide. If the ottomans are in a war in the 1900's then an event should disporise (and remove

) some armenian pops and explain the actual tragedy of what happened. In namibia and south africa and belgian congo and africa in general there should be lots of information about the real and tragic situations that happened. Hell I'd go so far as to make whoever owns the congo have to deal with an ingame crisis over their inherent brutality and have the state recognize and reorganise the situation at some point.
If done solemnly it could actually go a great way of educating people about these tragedies, represent real history, and not encourage or give the players any dopamine for intentionally playing evil. Surprisingly few people know about the genocides preceding world war 2 and this game is the perfect conduite to real education in the community.
If you depict it very very well and point out the horror and tragedy enough tbh it would really really anger the very real and very despicable portion of paradox's fan base that literally are pro genocide. I think pushing those assholes away from playing is a good thing for the brand in general.
Don't just be neutral to genocide. Be anti-genocide.