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It means the Reds could lose a player many consider the world's best in his position during his prime years.
And the 26-year-old's departure would also represent another dilemma to ponder for Richard Hughes and Arne Slot as they prepare for what promises to be a busy summer transfer window.
Along with Alexander-Arnold, Mohamed Salah and Virgil van Dijk are also out of contract and yet to agree extensions, while there are rumours Liverpool could target players throughout the side as Slot looks to remodel his squad.
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Our writers have their say.
Theo Squires
Losing Trent Alexander-Arnold would be a bitter blow for Liverpool.
Contract uncertainty regarding Mohamed Salah and Virgil van Dijk remains, but even if the pair stay put, there could still be a number of players moving on.
You can make an argument for Liverpool needing a new centre-back, left-back, holding midfielder, winger and centre-forward before even taking outgoings and possible replacements into consideration.
It would be wise for the Reds to prioritise using funds elsewhere rather than on a big-money Alexander-Arnold replacement, especially when there is already a player of the quality of Bradley in reserve.
He is classed as homegrown at least, though his experience predominantly comes at wing-back rather than full-back.
Either way, Liverpool have plenty to consider as multiple plates continue to spin heading into the summer transfer window.
Joe Rimmer
Liverpool shouldn't try to replace Trent Alexander-Arnold, because Trent Alexander-Arnold is irreplaceable.
And while Liverpool will miss him, the best response to his departure might be through tactical tweaks rather than the transfer market.
Sure, Liverpool will need further cover and competition for Conor Bradley, but the Northern Irishman deserves the chance to nail down the position himself after providing excellent back-up to Alexander-Arnold in the past two seasons.
Put simply, Liverpool will be better served spending their money elsewhere
And that's all without the exits of Mohamed Salah and Virgil van Dijk.
Whatever happens, it's going to be a very busy summer and while Alexander-Arnold's exit will no doubt hurt, it shouldn't alter the Reds' transfer plans too much