Does smoking Shisha with 0% tar and 0.5% nicotine cause cancer?

You are right, inhaling anything outside of oxygen is bad. Even atmospheric air contains toxins that are bad. If it is only an issue of 0% tar vs. any other % tar yes your friend is right. 0% tar is better than .01% tar or higher. But, and that is a big but, the bigger picture is your friend is inhaling a toxin. Any toxin has the ability to alter the our cells dynamics, and that is in a nutshell, how cancers start up a mutation/alteration in how the cells grow. So, it seems rather pointless for your friend to say it is healthier this way when they are still inhaling toxins that can cause as much damage. Your friend sounds as if they are just trying to justify a dangerous practice/addiction by throwing the attention onto a mute point.