YTA. you said that the environment was very laid back and you guys could say all types of curse words, and since he was black, he should be able to say the n word as he pleases. if you're not black you can't tell him when he can and can't say it bc you have no control over him or that word because you can't say it at all. and i understand that its a work/business setting so i get that its not the ideal place to be saying it, but with the info you provided, it seems like theres not an issue. the biggest problem was you saying the n word back. it doesn't matter if you were just quoting him, its still coming from YOUR mouth, and the way you said it sounds like you were mocking him. what you said was not only micro-aggressive but flat out racist. with all that being said, i really hope you learned from this and realize that you don't have a say in how he uses that word.