The suggested answer solves the problem partially: it does offset the app's view, but it also erases the system icons.

I don't want them to be erased, because they might have a value for a user, and this is how it was in all Android versions up to API 34.

My solution looks more like a hack but it fixes the problem and makes the app look like in API 34 and all prior version

        if (android.os.Build.VERSION.SDK_INT >= android.os.Build.VERSION_CODES.VANILLA_ICE_CREAM){
           binding.rootToolbar.setPadding(0,
           binding.rootToolbar.minimumHeight/2, 0, 0)
        }

Yes, it's ugly but it works and now I have what I wanted: Thanks Google for breaking the code again.

@atzarul, if you know what else I can tweak in API 35 to return to the old look, please share