What's on the bottom of that mesh, below the current problem? The way the normals are smoothing it looks like you've capped it but not unwrapped the cap or split it with a smoothing group.
Put the faces you want to keep angular in a separate smoothing group, and in the Meshsmooth panel check "Separate by Smoothing Groups" But read the tutorial also.
Hey, after taking a look at the Blend file, here are some notes: Lowpoly - lowpoly has some hard edges with no splits UVs (for example along edge the blade) - this will result in artifacts when baking the normal map. Using the "Auto Smooth" modifier, which shades edges hard by angle can easily introduce such cases that go…