Say I have a Latios and he uses Draco Meteor. His Special Attack drops to -2. Next turn he uses Psyshock. Even though Psyshock is a Special move, it targets the opponents Defence. Is the damage of Psyshock affected by any drops in Special Attack?
Yes. Psyshock is still a special attack even if it does damage differed by the opponents defense so it will do less damage.