Climate‐driven tree mortality has increased globally in response to warmer temperature and more severe drought. To examine how tree mortality in semiarid biomes impacts surface water balance, we experimentally manipulated a piñon‐juniper (PJ) woodland by girdling all adult piñon trees in a 4 ha area, decreasing piñon basal area by ~65%. Over 3.5 years (2009–2013), we compared water flux measurements from this girdled site with those from a nearby intact PJ woodland. Before and after girdling, the ratio of evapotranspiration (ET) to incoming precipitation was similar between the two sites. Girdling altered the partitioning of ET such that the contribution of canopy transpiration to ET decreased 9–14% over the study period, relative to the intact control, while noncanopy ET increased. We attributed the elevated noncanopy ET in the girdled site each year to winter increases in sublimation and summer increases in both soil evaporation and below‐canopy transpiration. Although we expected that mortality of a canopy dominant would increase the availability of water and other resources to surviving vegetation, we observed a decrease in both soil volumetric water content and sap flow rates in the remaining trees at the girdled site, relative to the control. This postgirdling decrease in the performance of the remaining trees occurred during the severe 2011–2012 drought, suggesting that piñon mortality may trigger feedback mechanisms that leave PJ woodlands drier relative to undisturbed sites and potentially more vulnerable to drought.