There is a lot of MISinformation in this thread, so sorry for the confusion.
First, "Gearfried the Iron Knight's" effect is a trigger effect, much like "King Tiger Wanghu" or "Lava Golem". Reference this message thread to confirm GtIK's effect type: http://www.pojo.biz/board/showthread.php?t=278104
Second, even though I referenced "Spirit Reaper" which has a continuous effect and "Gearfried's" is a trigger effect, these monster effects will not interrupt the Calculate Damage portion of Damage step. Damage is calculated and applied and then their effects are applied in the Resolve Effects substep of Damage Step.