"Revese Trap's" effect is not applied because "doubled and halved" are not considered as increasing or decreasing.
If Karate Man is equipped with Megamorph, and Megamorph is halving Karate Man's ATK, and you use Karate Man's effect, Karate Man's ATK is 2000. If you use Karate Man's effect, and THEN equip him with Megamorph after that, and Megamorph would halve his ATK, then his ATK is 500.
If the effect of "Shrink" is applied after "Karate Man's" effect has been used, its ATK will become 500. If "Karate Man" is affected by "Shrink", then its effect is activated, its ATK will become 2000.