The "commercial dollar'" of 1873-85, as the Trade dollar was initially known, is the only case in U.S. numismatic history where a coin of the realm has been demonetized, although that was changed in 1982 when the coin again became legal tender.
The situations that brought about the Trade dollar were both economic and political. The London silver market was no longer an effective place to sell U.S. silver following a switch to a gold standard by Germany in 1871. Germany dumped large quantities of silver onto the London market after 1871.
Merchants in port cities of China were refusing to accept any foreign silver coins except older Mexican 8-real types. U.S. importers trading with China were paying up to a 15 percent premium for Mexican coins to pay for goods they were importing.
Congress was petitioned to make special overweight dollars of 27.22 grams or 420 grains weight with a purity of .900 fine by the California legislature. (The Seated Liberty silver dollar of 1840 to 1873 has a weight of 26.73 grams and is composed of .900 fine silver.)
The idea was supported by Deputy Comptroller of the Currency John Jay Knox, who was at the time investigating the disappearance of large amounts of precious metals from U.S. Mint facilities.
In 1870 Knox filed a report that included the idea of a commercial dollar to encourage the international trade of U.S. mined silver.
The resulting Trade dollar is described in Walter Breen's Complete Encyclopedia of U.S. and Colonial Coins as "an expensive mistake – its motivation mere greed, its design a triumph of dullness, its domestic circulation and legal tender status a disastrous provision of law leading only to ghastly abuses."
The name Trade dollar came with the Feb. 12, 1873, act authorizing the coins. The designs were executed by U.S. Mint Engraver William Barber, following several rejected pattern designs.
The obverse of the accepted design depicts the left seated figure of Liberty (facing China) wearing a beaded coronet and holding a ribbon with the motto liberty in one hand and an olive branch in her extended right hand. She sits on a bale of cotton with sheaf of wheat behind her, 13 stars in the field and date in the exergue. Above the date is in god we trust.
The reverse depicts an eagle with outstretched wings holding three arrows in the right claw and an olive branch in the left claw. The border legend reads united states of america trade dollar.
A ribbon above the eagle has the legend e pluribus unum. Below the eagle is 420 grains 900 fine.
The Mint mark S for San Francisco or CC for Carson City is below the eagle, weight and purity. Congress revoked the legal tender status of the Trade dollar in 1876, but the coins were struck officially for two more years. The business strikes ended in 1878, with Proof coins struck for collectors through 1883. Proof coins of 1884 and 1885 were struck clandestinely by a Mint employee.
The Trade dollar regained its legal tender status in 1982 with the recodification of the section of the United States Code dealing with "Money and Finance."
The Trade dollar met with unanticipated competition soon after its release. In 1874 Japan issued its own Trade dollar. (The British Trade dollar of the 1890s was often made by restriking U.S. Trade dollars.)
The U.S. Trade dollar was a modest success in the markets of southern China, but was unable to find acceptance in northern China.
Traditionally, Trade dollars with Chinese chop marks (marks made by merchants and bankers to certify or check for metal purity) have sold for lower prices than specimens without chop marks.
Studies dealing with the chop marks that have brought a greater interest to the marked specimens.
The most commonly encountered date, due to its mintage, is the 1877-S (more than 9.5 million minted). Among the business strikes the lowest mintage is 124,500 for 1873-CC although several other dates trade at lower prices.
Some of the Proof issues are almost unobtainable for the average collector.
The Proof-only mintages include 1878 and 1879 through 1885. In 1884 only 10 coins were struck, with an additional five coins struck dated 1885. All Proofs were struck at Philadelphia.
The highest mintage of any Proof Trade dollar is 1880 at 1,987 specimens.
One of the problems in collecting this series is availability. Since most circulation strike coins being returned from the Orient were chop marked and of questionable legal tender status in the United States, collectors treated them as mutilated coins and many were melted.
There are several ways to approach collecting Trade dollars. With only five potential complete sets possible when including Proofs, most collectors will settle for a business strike set or a representative business strike set of one coin of each date.