Although American trade with countries of the Far East including China was growing at a steady pace in the late 1860’s and early 1870’s, things weren’t good for the US. To the disappointment of the American businessmen in America, the Chinese merchants preferred the Mexican peso as a medium of exchange. This was because the peso contained a little more silver than the standard US silver dollar. In order to be competitive in the Far Eastern market, the American Businessmen were forced to trade dollars for pesos and pay broker fees.
In an attempt to eliminate the peso’s advantage in 1873 and improve American trade, Congress approved a new coin. This new coin was called the US Trade Dollar, and it weighed 420 grains which was slightly heavier than the Mexican peso with a little more silver in its composition. In the US, the Trade Dollars were legal tender in transactions up to five dollars. However, almost all of the Trade Dollars made during the first two years were sent overseas. At this time, the US Trade Dollars were declared the official trade dollar of the country in Peking, China. This preference of the US Trade Dollar in commerce with China remained strong until 1875.
The US Trade Dollar might have continued to be in demand if it weren’t for events that occurred in America. The price of silver plummeted quickly because the western states’ mine owners were dumping huge amounts of silver onto the market in 1876. The metal value of the Trade Dollar dropped to a mere 80 cents. Shortly afterwards, millions of Trade Dollars returned back to the US where they were spent at face value.
Realizing something had to be done about this abuse, Congress revoked the status of the Trade Dollar as the legal tender on July 22, 1876 and seemingly restricted the Trade Dollar coinage to exportation only. However, the Trade Dollars’ troubles did not end. Large amounts of Trade Dollars were now hoarded by devious individuals at bullion cost and sold at face value to wage earners and merchants. They, in turn, then passed them on, and in the end someone got stuck with a Trade Dollar at a loss. As long as the Trade Dollar remained public, speculators continued to buy and sell the coin at others’ expense. To further complicate matters, anyone could exchange 378 grains of silver and a small coining fee for a trade dollar.
John Sherman, Treasury Secretary, put a stop to the commercial manufacture of the coin in 1878. The Trade Dollar was then limited to proof strikes for collectors only. The millions of Trade Dollars still in domestic circulation at that time continued to be exploited. This finally ended when Congress passed legislature that allowed redemption of non-mutilated Trade Dollars in February, 1887. As a result, approximately eight million were turned in.
With the passage of the coinage Act of 1965 by Congress, the Trade Dollar again gained status as legal tender. US Trade Dollars dated 1884 and 1885 are the rarest. These Trade Dollars were issued only in Proof and quantities of ten to five. Their existence was unknown until 1908. They were probably made in secret for a collector, William Idler. In spite of their suspicious origin, the 1884 and 1885 Trade Dollars are among the most valuable of all US coins. All Trade Dollars dated 1879 through 1883 that are in Proof condition have shown increases of solid value over decades.
Proof coins are made with a specially polished and treated die. Each coin is struck with the die two or more times. This gives a very fine detail to the coin. If the coin has been uncirculated, it will be in Proof condition.
Although 1879-1883 US Trade Dollars were issued only in Proof condition, many of them have circulation wear.
When buying, you must be careful because there are many counterfeit Trade Dollars in the marketplace. Ironically, they originated in China. To protect yourself from buying counterfeit Trade Dollars, you should only purchase ones graded by the Professional Coin Grading Service (PCG), Numismatic Guaranty Corporation (NGC), Independent Coin Graders (ICG), ANACS (America’s Oldest Grading Service), or at the very least sold by a reputable dealer. If a Trade Dollar being auctioned does not meet these requirements, “run don’t walk”.