The 22-year-old responded to his critics with an emphatic winner against Aston Villa on Saturday to earn the champions their first Premier League win at Anfield in four months.
Souness told Sky Sports: "He has a place in the [ Liverpool ] team, predominantly to supply telling passes, telling crosses and he's the best right back in the country at doing that.
"Where he is vulnerable, especially this year, he's not defending well, he's not the same lad that we've seen the last two seasons, for whatever reason.
"He's not got the comfort blanket of arguably the best centre-back around playing next to him [Virgil van Dijk]. He's proved to be vulnerable this year."
Souness also claimed Southgate has settled on Manchester City's Kyle Walker as his first-choice right back, adding: "I think Gareth Southgate is in a difficult position with him [Alexander-Arnold]. He sees Walker as his number one.
"If you're going to play four [at the back] all the time, these are games that you can't have one bad night, it can cost you everything.
"You've got to go for reliability, people who make the fewest mistakes and defensively that's not Trent Alexander-Arnold this year.
"If you'd asked me this question 12 months ago, I'm saying 'take him' but now I'm not sure he'll get on the plane."
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