What are the main performance differences between varchar and nvarchar SQL Server data types?

nvarchar is going to have significant overhead in memory, storage, working set and indexing, so if the specs dictate that it really will never be necessary, don't bother.

I would not have a hard and fast "always nvarchar" rule because it can be a complete waste in many situations - particularly ETL from ASCII/EBCDIC or identifiers and code columns which are often keys and foreign keys.

On the other hand, there are plenty of cases of columns, where I would be sure to ask this question early and if I didn't get a hard and fast answer immediately, I would make the column nvarchar.

Generally speaking; Start out with the most expensive datatype that has the least constraints. Put it in production. If performance starts to be an issue, find out what's actually being stored in those nvarchar columns. Is there any characters in there that wouldn't fit into varchar? If not, switch to varchar. Don't try to pre-optimize before you know where the pain is. My guess is that the choice between nvarchar/varchar is not what's going to slow down your application in the foreseable future. There will be other parts of the application where performance tuning will give you much more bang for the bucks.

I can speak from experience on this, beware of nvarchar. Unless you absolutely require it this data field type destroys performance on larger database. I inherited a database that was hurting in terms of performance and space. We were able to reduce a 30GB database in size by 70%! There were some other modifications made to help with performance but I'm sure the varchar's helped out significantly with that as well. If your database has the potential for growing tables to a million + records stay away from nvarchar at all costs.