Arctic climate is projected to change dramatically in the next 100 years and increases in temperature will likely lead to changes in the distribution and makeup of the Arctic biosphere. A largely deciduous ecosystem has been suggested as a possible landscape for future Arctic vegetation and is seen in paleo-records of warm times in the past. Here we use a global climate model with an interactive terrestrial biosphere to investigate the effects of adding deciduous trees on bare ground at high northern latitudes. We find that the top-of-atmosphere radiative imbalance from enhanced transpiration (associated with the expanded forest cover) is up to 1.5 times larger than the forcing due to albedo change from the forest. Furthermore, the greenhouse warming by additional water vapor melts sea-ice and triggers a positive feedback through changes in ocean albedo and evaporation. Land surface albedo change is considered to be the dominant mechanism by which trees directly modify climate at high-latitudes, but our findings suggest an additional mechanism through transpiration of water vapor and feedbacks from the ocean and sea-ice.