Ecosystem water and carbon dynamics are controlled by the forcing-response characteristics of the vegetation-soil-atmosphere continuum. Soil moisture and atmospheric water demand are well established to regulate plant water uptake and carbon assimilation, but the specific causal mechanisms and magnitudes by which plants respond to either or both of these forcings, particularly during periods of soil moisture drydown between precipitation pulses, are less understood. We investigate the causal linkages in this continuum, focusing on the impact of vegetation water-use strategies on different causal regimes of land-atmosphere feedback during drydowns using observations of soil moisture, vapor pressure deficit, and vegetation water content across the Continental US. We identify two prevalent regimes in grasslands: (1) a soil-water limited regime where vegetation water content follows soil moisture closely, increasing atmospheric demand via transpiration and responding to aridity (65.8% of grasslands), and (2) a regime in which grasses retain water content under drying conditions, driven by adaptive traits related to the C4 photosynthetic carbon fixation pathway and high water-use efficiency (33.1% of grasslands). We demonstrate that the biological distinction between C3 and C4 photosynthetic pathways fundamentally alters causal feedbacks in the plant-soil-atmosphere system, governing grassland vulnerability to drought and modulating ecosystem resilience in a warming climate.