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Abstract Species coexistence attracts wide interest in ecology. Modern coexistence theory (MCT) identifies coexistence mechanisms, one of which, storage effects, hinges on relationships between fluctuations in environmental and competitive pressures. However, such relationships are typically measured using covariance, which does not account for the possibility that environment and competition may be more related to each other when they are strong than when weak, or vice versa. Recent work showed that such ‘asymmetric tail associations’ (ATAs) are common between ecological variables, and are important for extinction risk, ecosystem stability, and other phenomena. We extend MCT, decomposing storage effects to show the influence of ATAs. Analysis of a simple model and an empirical example using diatoms illustrate that ATA influences can be comparable in magnitude to other mechanisms of coexistence and that ATAs can make the difference between species coexistence and competitive exclusion. ATA influences may be an important new mechanism of coexistence.