Yes. The sidewall only accounts for a specific section of the side of the tire. You're excluding the portion which has to mate with the outer diameter of the barrel of wheel, as well as the entire outer tread. There's a LOT of material there in those two parts that aren't, "sidewall", nor accounted for in the size code.

For example, I have 35mm sidewall sports car tires on 20" (only wheel offered by the manufacturer) diameter wheels. That would be less than 23" if we calculated as you did. The actual total diameter of an inflated tire though is ~27" (26.947") per the tire manufacturer (Michelin).

I confirmed my assertion that it's 35s by running it through a tire diameter calculator (I do track days), and looking at outer tire diameters for tires for 23" wheels as a sanity check. Moreover, several media outlets (Autopian - partly run by a Jeep fanatic - The Drive, others) agree with me -- they are indeed 35".

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To be fair, for off-road tires, they're usually coded different. For example, a Hummer H1 which indeed has a 37" outer diameter tire, is coded as 37X12.5-16.5. But the Escalade IQs tires are coded as normal passenger tires, or 275/50R24.