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The Wild Shape feature includes the following:

[...] if you revert as a result of dropping to 0 hit points, any excess damage carries over to your normal form. [...]

Meanwhile, the absorb elements spell reduces damage taken, even the triggering damage source. And from the spell description we can also see the following:

1 Reaction [...] which you take when you take acid, cold, fire, lightning, or thunder damage [...]

So what happens if a low level Wild Shaped Druid has 10 HP left in their Wild Shape form and takes 30 fire damage?

They cannot cast the spell at first because they are in Wild Shape, but then, after 10 damage, they revert to their normal form. Can they then cast the spell?

If they can cast the spell, does it only impact the remaining 20 damage or does it have some sort of retroactive effect on the damage they already took?

If it does have a retroactive effect, what happens if they initially only took 16 damage?

How does the absorb elements spell interact with Wild Shape?

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In this scenario, the character is taking damage, becomes able to use spell reactions mid-damage, and the absorb elements spell reacts to taking damage, so I see no reason to stop the character from using this spell as you describe.

The Sage Advice Compendium helpfully answers how to deal with resistance that suddenly appears when a transformation ends. While this answer is directly dealing with always-on resistance (such as a Dragonborn's innate resistance or resistance gained from a magic item that was previously merged with the transformed state and has now re-activated as the transformation ended), it pretty clearly answers your questions about whether the resistance is retroactive:

If a creature under the effects of polymorph takes enough fire damage to revert to its true form and that form has fire resistance, does the true form take the full remaining damage or only half due to resistance?

When the creature reverts to its true form, any leftover damage is subject to that form’s damage resistances, if any.

So if the wildshaped form had 10 HP and then took 30 fire damage, the first 10 points break the transformation, and then the remaining 20 fire damage that carries over is halved by resistance to 10 actual damage against the character's HP.

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    \$\begingroup\$ Is there any evidence that damage isn't all applied at once (the resistance stuff is just calculating the value, the effect is still instant)? Is there still a window for the reaction after the damage has started having it's effect? \$\endgroup\$
    – SeriousBri
    Aug 2 '21 at 21:28
  • \$\begingroup\$ @SeriousBri It's true that generic reactions happen after the trigger (e.g. there is a "window for the reaction"), but the abosrb elements spell has as casting time "1 reaction, which you take when you take acid, cold, fire, lightning, or thunder damage", which means it happens in the instant it is cast, "interrupting the trigger" as stated in the DMG. If it there is time to cast it in a normal situation, there is to cast it in this non-standard situation. \$\endgroup\$ Aug 3 '21 at 11:45
  • \$\begingroup\$ @SeriousBri You choose to use a reaction after the trigger occurs, and sometimes the reaction goes "back in time" to affect the event that triggered it. I don't see how the character taking damage could possibly not be "you take [...] damage". \$\endgroup\$ Aug 3 '21 at 13:05
  • \$\begingroup\$ My line of thought is that by the time you revert to human form you are not taking the damage, you have taken the damage. Damage is an instant thing as far as I am aware, there is no 'you take ... damage' at the point when the reaction becomes available. Or there might be, I am just wondering if you have anything to back up the answer in that way, or if it is an educated interpretation. I might post this as my own answer, but I can see myself being convinced by yours. This is a tricky question. \$\endgroup\$
    – SeriousBri
    Aug 3 '21 at 19:00
  • \$\begingroup\$ It's just an interpretation of what's happening. \$\endgroup\$ Aug 3 '21 at 19:07

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