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Abstract Droughts are predicted to become more frequent and intense in many tropical regions, which may cause shifts in plant community composition. Especially in diverse tropical communities, understanding how traits mediate demographic responses to drought can help provide insight into the effects of climate change on these ecosystems. To understand tropical tree responses to reduced soil moisture, we grew seedlings of eight species across an experimental soil moisture gradient at the Luquillo Experimental Forest, Puerto Rico. We quantified survival and growth over an 8‐month period and characterized demographic responses in terms of tolerance to low soil moisture—defined as survival and growth rates under low soil moisture conditions—and sensitivity to variation in soil moisture—defined as more pronounced changes in demographic rates across the observed range of soil moisture. We then compared demographic responses with interspecific variation in a suite of 11 (root, stem, and leaf) functional traits, measured on individuals that survived the experiment. Lower soil moisture was associated with reduced survival and growth but traits mediated species‐specific responses. Species with relatively conservative traits (e.g., high leaf mass per area), had higher survival at low soil moisture whereas species with more extensive root systems were more sensitive to soil moisture, in that they exhibited more pronounced changes in growth across the experimental soil moisture gradient. Our results suggest that increasing drought will favor species with more conservative traits that confer greater survival in low soil moisture conditions.