What happened 

Shares of solar installer Vivint Solar Inc (NYSE:VSLR) jumped as much as 11.4% in trading Tuesday on news that solar imports wouldn't be as bad as feared. The Trump administration still slapped a hefty 30% tariff on cell and module imports in 2018, but that wasn't as high as petitioners asked for and wasn't a nuclear hit to the solar industry. At 3:45 p.m. EST, shares were still up 6.3% on the day. 

So what

Tariffs on solar panel imports will be 30% in the first year (beginning in February) and then decline by 5% each year after that. In total, the cost of solar panels will rise about $0.10 per watt in the first year, falling to only about $0.05 per watt in 2021 (if tariffs last that long). 

Residential roof with solar panels on it.

Image source: Getty Images.

Vivint Solar can absorb that cost into its business by raising prices slightly or lowering costs elsewhere in the business; a $0.10 increase on an installation that costs around $3.00 per watt isn't the end of the world. 

Now what

The reaction by the market today seems overdone because Vivint Solar will definitely be negatively impacted by tariffs, even if the negative impact isn't as bad as feared. In general, we can expect 2018 installations to be about the same as in 2017, although there might be a slight decline if marginal markets become uneconomical. Shares may have been up today, but this isn't the time to get bullish on solar installers in the U.S. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.