Trees affect organic matter decomposition through allocation of recently fixed carbon belowground, but the magnitude and direction of this effect may depend on substrate type and decomposition stage. Here, we followed mass loss, chemical composition and fungal colonisation of leaf and root litters incubated in mountain birch forests over 4 years, in plots where belowground carbon allocation was severed by tree girdling or in control plots. Initially, girdling stimulated leaf and root litter mass loss by 12% and 22%, respectively, suggesting competitive release of saprotrophic decomposition when tree-mediated competition by ectomycorrhizal fungi was eliminated (Gadgil effect). After 4 years, girdling instead hampered mass loss of root litter by 30%, suggesting late-stage priming of decomposition in the presence of trees, in parallel with increased growth of shrubs and associated fungi following tree elimination. Hence, different mechanisms driving early- and late-stage litter decomposition should be considered in climate-feedback evaluations of plant–soil interactions.