Despite being created for international circulation, United States trade dollars circulated within the borders of the United States in the 19th century, causing such problems that they were demonetized three years after their introduction. Their lack of legal tender status after 1876 failed to dissuade employers and merchants from circulating the coins.
Introduced in 1873 to compete with heavier world silver coins like the Mexican peso popular with merchants in China and throughout Asia, trade dollars initially enjoyed legal tender status in the United States in sums up to $5. As silver prices fell after 1873, the trade dollar’s intrinsic value fell below one dollar and workers and consumers were soon inundated with the coins. Merchants could make a profit having their silver coined into trade dollars (even if they had no intention of sending the coins overseas) and began circulating them domestically.
Responding to widespread abuse, Congress demonetized trade dollars on July 22, 1876. Circulation strikes continued to be produced through 1878, though the Mint stipulated that the coins had to be used for international trade. Controls were lax and the coins, which circulated at a significant discount after demonetization, continued to be used in the United States. In 1883, a New York Times article denounced trade dollars as “bastard coins.” Less-than-scrupulous employers sometimes paid illiterate/unwitting workers with trade dollars even after they were demonetized. Beginning in 1879, only Proof coins were struck. Authority to coin trade dollars was officially repealed in 1887.
The Coinage Act of 1965, which authorized copper-nickel clad dimes, quarters, and half dollars, remonetized trade dollars, though by that time workers would have been coming out ahead if they were paid with these coins at their face value.