Q: itunes 12 and external hard drive

So I just updated to the new version of iTunes this morning and when i opened it up none of my music was there but it made me religion to my apple account of course and all of my music showed up again but its all on the cloud. I have all of my music saved on an external drive and i updated the preferences to point to the right folder but I think that only effects where the music is saved. I know that I can import all of my music again but I don't want to duplicate everything thats in the cloud. I also don't want to select the download from cloud because then I would probably have duplicates on my hard drive. What is the best way to fix this?