Authorization of trade dollars: The Coinage Act of February 12, 1873, framed by the Treasury Department and' refined by much discussion in Congress, generally revised the coinage laws. Among many other provisions, the act created the trade dollar. One of the most relevant sections of the act is the following:
Section 21: That any owner of silver bullion may deposit the same at any mint, to be formed into bars, or into dollars of the weight of 420 grains, troy, designated in this act as trade dollars, and no deposit of silver for other coinage shall be received; but silver bullion contained in gold deposits, and separated there from, may be paid for in silver coin, at such valuation as may be, from time to time, established by the director of the Mint.
In essence, the foregoing stated that owners of silver bullion could deposit the same at any mint and receive trade dollars in payment, but could not receive dimes, quarters, or half dollars. If such silver had been obtained as a by-product of gold refining, then subsidiary coins could be paid out in exchange, at the discretion of the Mint director. Other provisions, including Section 28, discussed subsidiary coins, but in practice few silver coins other than trade dollars were paid out in 1873.
The charge for converting silver bullion to trade dollars was to be set by the director of the Mint, with the concurrence of the secretary of the Treasury, so as to equal, but not to exceed, in their judgment, the actual average cost to each mint of labor, wastage, machinery, and other expenses.
In his memoirs, Sen. John Sherman observed this concerning the Coinage Act of 1873: (John Sherman's Recollections of Forty Years in the House, Senate, and Cabinet, Vol. I, p. 467. Years later, in 1888, Sen. Beck said in open forum that Sherman was responsible for the Act of 1873 and that it was "secretly passed and surreptitiously done." The charge was easily refuted by Sherman, who produced original documents from the Treasury Department. Ibid; Vol. II, p. 1010.)"There was never a bill proposed in the Congress of the United States which was so publicly and openly presented and agitated. I know of no bill in my experience which was printed, as this was, 13 times, in order to invite attention to it. I know no bill which was freer from any immoral or wrong influence than this Act of 1873."
Competition with Mexico: The reign of Emperor Maximilian in Mexico 1866-7 saw the production of silver pesos with his portrait. Such coins, differing as they did from the traditional Mexican cap-and-rays eight-reales design in use for years, were rejected by Chinese merchants, thus affording an opportunity for American Liberty Seated dollars (see Coinage Context under the 1867 Liberty Seated dollar listing) and, later, trade dollars.
A telegram from Henry R. Linderman, director of the Mint, to James Pollock, superintendent of the Philadelphia Mint, June 25, 1873, stated the following: (This and Pollock's reply are taken from a quotation in U.s. Trade Dollars 1873-1878, John Lazirko, 1989, P. 7.)
When will you commence coinage of the Trade Dollar. Mexican congress has restored the dollar [design] prior to eighteen sixty seven (1867). Not a moment to be lost in the issue of our dollar.
Pollock replied by letter on July 11, 1873: I send you specimen of trade dollar in tin, (This is the variety known today as Judd-1330. Multiple examples exist. John Lazirko notes (ibid., p. 8) that in the 1970s a specimen was analyzed by the University of New Hampshire. It was found to be 10 parts tin and one part copper.) Struck today.
We will commence the regular coinage of the trade in a few hours. The enclosed will give you a tolerably correct idea of the silver dollar.
Trade dollars legal tender at the outset: Trade dollars were legal tender up to the amount of $5 worth in any transaction. At the time this was fine and dandy, for a trade dollar contained about $1.02 worth of silver. However, in 1874 the value declined to about $1, and in 1875, it dropped further to about 98Â¢. After this time, actually in 1876, the trade dollar's legal tender status was voided.
Production of business strikes: Production began on July 11, 1873 at the Philadelphia Mint. As the San Francisco Mint was the least distant from China, from the outset the Treasury established a policy of sending the largest number of dies to San Francisco, where it expected that the majority of silver deposits would be made, intended for coinage into trade dollars.
Contemporary commentary: The first business strike trade dollars were made at the Philadelphia Mint on July 11, 1873. The Philadelphia Evening Telegram of that date noted in part:
Foreigners and others who are not familiar with our money have experienced considerable difficulty in handling our coin in exchange, because its comparative value and fineness were unknown to them. As our silver dollar was believed to be as nearly a true standard of value as was convenient, it was generally taken as the basis of commercial calculations where no special agreement concerning the money to be used in settlement was agreed upon. To cast aside all doubt, however, and to render our dollar piece perfectly intelligible to the people of all countries, as well as to conform to the new price of silver (formerly $1.225 per standard oz., but now $1.20), the "Trade Dollar" was especially designed. It has its positive degree of fineness, or quality, expressed on its face, as well as its weight; hence the holder of any given quantity is enabled to at once tell the exact value of the money he may have on hand. To our people this would be a matter of but little importance because we know exactly what our coins are worth; but with the foreigner the case is vastly different. The simplifying of the coin makes the people of all countries familiar with its value, and at once strips the piece of all the mystery with which the bankers, exchange brokers, and others are wont to surround it, thus placing it upon the market of every country and appropriately naming it the "Trade Dollar."
At the outset the desire was to ornament the coin with a device which should at once typify the country to which it belonged, as well as the uses to which it was to be put; hence, there has been placed on the obverse a female figure seated on bales of merchandise, holding in her left hand a scroll bearing the word LIBERTY. At her back is a wheat sheaf to express, with the bale of goods, the combined agricultural and commercial character of the coin, while her right hand, extended toward the open sea, bears aloft the olive branch, to express the peace invitation and a cordial greeting to all thedistant nations of the earth, which ever accompany the mutual interests of commerce. On a scroll immediately beneath the bale of goods are the words IN GOD WE TRUST.
The reverse has around the outer circle the words UNITED STATES OF AMERICA-TRADE DOLLAR. In the centre is an eagle bearing in its claws three arrows and a sprig of olive. In a scroll directly over the eagle are the words E PLURIBUS UNUM. Immediately underneath is the indication of its value: 420 GRAINS, 900 FINE.
The coining of these new pieces commenced this morning, but it will be some days before a sufficient number of the dies are finished, to enable the mint to fill all the orders which are already on hand.
Distribution of business strikes: On July 14, 40,000 coins. were released. Ensuing months saw strong business strike production, except for October when none was coined. The record output for the year was achieved in September, when 103,500 were struck. Trade dollars first reached China in October 1873 where they met a good reception. Nearly all of the 1873 trade dollars went to that country.