Trade Dollars: A Great Success Abroad But Not at Home

By Bullion Shark LLC ……

In the 1850s, as a result of the discovery of large gold deposits in Australia and the Western United States, the price of gold declined. And following the discovery of even larger silver deposits–especially the Comstock Lode of Virginia City, Nevada in 1859–the price of silver declined in the following decade.

At the same time, trade between the U.S. and China was increasing. Chinese merchants preferred to be paid in Mexican silver pesos minted from 1824 – successors to the Spanish pieces of eight issued from 1535. This meant that American exporters had to purchase Mexican pesos to send abroad, which incurred a lot of broker fees (including a 12% excise tax from 1867). Plus, the Mexican coins were worth a premium of 2% to 22% over American Seated Liberty silver dollars of the time, which were smaller and contained less silver.

The Rationale for the Coin

A coin was needed that would address two problems: the need for a trade coin to facilitate commerce with the “Far East” and a way to flush excess silver out of the domestic economy.

When Mexico in 1866 changed the designs of its coin during the reign of Maximillian to include a portrait of the new emperor, the new Mexican coins with the balance-scale motif were unfamiliar and not well accepted in China. This provided an opening.

In the fall of 1872, Louis A. Gannett, Treasurer and Assayer at the San Francisco Mint, wrote a report recommending that the United States Mint produce a commercial dollar for export to East Asia that would compete with other coins of this type. His reasoning was that most of those coins would be hoarded or melted in Asia and never redeemed, which would create a large seigniorage profit.

Of significance is the fact that, after this proposal became the basis for legislation, a Treasury Department agent named Henry Linderman suggested that the coins did not need to have legal tender status and could simply be similar to silver bullion bars that have their weight and fineness stamped on them. Many numismatists today believe it would have been far preferable if the coins had remained silver bullion and not legal tender, especially given their later reception in the U.S.

As these ideas were crafted into the Coinage Act of 1873, the U.S. House of Representatives proposed a heavier silver dollar with a weight of 420 grains (27 grams). But then the House voted that a standard silver dollar with the same weight as the existing coins of 384 grains (24.9 grams) be minted. And then the Senate changed it back to the heavier coin – which is what was actually enacted and why the Trade dollar is larger and heavier than other U.S. silver dollars.

In addition, the Trade dollar was given a last-minute legal tender status up to $5 total per transaction, and inscriptions were added to the reverse indicating the weight and fineness, which Chinese merchants were not able to understand.

The design of the new Trade dollar first minted in 1873 was created by Chief Engraver Charles Barber and featured on its obverse Liberty as a seated figure resting on a bale of merchandise facing to the viewer’s left (toward East Asia), while the reverse featured a bald eagle holding three arrows and an olive branch.

History of the Trade Dollar

The coins were minted from 1873 to 1878, but were only legal tender until 1876, and after 1878 they were made only in small quantities and struck in Proof for inclusion in sets. The Proofs of 1884 and 1885, whose origins are not clear, are among the great rarities of 19th-century American coinage

Chop marks were added by Chinese merchants to the coins, most likely to test their authenticity, and some coins received multiple such marks as they passed from one merchant to another. Today, the coin is very popular with collectors, and Mint State examples are scarce and expensive. Even nice circulated examples are not plentiful in the current market.

The coin was also widely counterfeited, especially in China using base metals, so buyers should be careful about acquiring examples that have not been professionally graded.

From 1873 to 1878, the Trade dollar became increasingly popular in China with demand for the coins rising, and they were by this time worth a 2% premium over silver Mexican pesos. Meanwhile, U.S. silver imports during this period declined sharply. By 1875, the coins had essentially replaced pesos in Asia.

But back home, the coins became a punching bag in domestic disputes over silver and a bimetallic monetary system. Silver advocates saw it as a threat, while those who favored a gold standard thought that the Trade dollar proved that a bimetallic system could not work.

The coin became very unpopular within the U.S., where it began appearing in commerce in 1874 because plummeting silver prices pushed its value down to 80 cents. Many banks and businesses refused to accept them, and those that did (such as in western states) set their own fixed and lower values on the coins.

Yet after it was demonetized in 1876, the type remained in circulation because silver bullion producers continued to have their silver coined into Trade dollars. Finally, in 1887, the law authorizing them was repealed, and all coins that were not damaged with chop marks were redeemed by the Treasury, making them the only U.S. coin ever recalled by the government.

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After the coin’s demise, more countries created their own trade dollars–such as the French piastre de commerce in 1885 and the British trade dollar in 1895–in addition to those that already existed such as the Japanese trade dollar. The U.S. had to resume importing Mexican silver coins at a premium for trading purposes.


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